<PAGE>
 
      
   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 1995     
                                                     
                                                  REGISTRATION NO. 33-57579     
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                                ---------------
                                 
                              AMENDMENT NO. 1     
                                       
                                    TO     
                                    FORM S-4
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
 
                                ---------------
                                UAL CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
         DELAWARE                  4512                 36-2675207
     (STATE OR OTHER        (PRIMARY STANDARD        (I.R.S. EMPLOYER
     JURISDICTION OF    INDUSTRIAL CLASSIFICATION     IDENTIFICATION
     INCORPORATION OR          CODE NUMBER)              NUMBER)
      ORGANIZATION)
 
                            1200 EAST ALGONQUIN ROAD
                       ELK GROVE TOWNSHIP, ILLINOIS 60007
                                 (708) 952-4000
              (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
       INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                               FRANCESCA M. MAHER
                            VICE PRESIDENT--LAW AND
                              CORPORATE SECRETARY
                                UAL CORPORATION
                            1200 EAST ALGONQUIN ROAD
                       ELK GROVE TOWNSHIP, ILLINOIS 60007
                                 (708) 952-4000
               (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
               NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
                                   COPIES TO:
            ROBERT E. CURLEY                       JOEL S. KLAPERMAN
          MAYER, BROWN & PLATT                    SHEARMAN & STERLING
        190 SOUTH LASALLE STREET                  599 LEXINGTON AVENUE
        CHICAGO, ILLINOIS 60603                 NEW YORK, NEW YORK 10022
             (312) 782-0600                          (212) 848-4000
 
                                ---------------
  APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
 
  If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [_]
 
                        CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                            PROPOSED         PROPOSED
                                                            MAXIMUM           MAXIMUM         AMOUNT OF
        TITLE OF EACH CLASS OF            AMOUNT TO      OFFERING PRICE      AGGREGATE       REGISTRATION
     SECURITIES TO BE REGISTERED        BE REGISTERED     PER UNIT(1)    OFFERING PRICE(1)       FEE
- ----------------------------------------------------------------------------------------------------------
<S>                                    <C>              <C>              <C>               <C>
Convertible Subordinated Debentures...   $600,000,000         100%         $600,000,000        $206,897(2)
- ----------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value, together
 with Preferred Stock Purchase
 Rights......................                (3)               --               --                --
- ----------------------------------------------------------------------------------------------------------
</TABLE>

(1) Estimated solely for determining the amount of the registration fee.
   
(2) Previously paid.     
   
(3) This Registration Statement also relates to such additional indeterminate
    number of shares of Common Stock as may be issued upon conversion of the
    Convertible Subordinated Debentures in accordance with the terms thereof to
    prevent dilution. Pursuant to Rule 457(i), no filing fee is required.     
 
                                ---------------
  THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE>
 
                                UAL CORPORATION
 
                             CROSS REFERENCE SHEET
                   
                (PURSUANT TO ITEM 501(B) OF REGULATION S-K)     
 

<TABLE>   
<CAPTION>
 FORM S-4 ITEM NUMBER AND CAPTIONS        HEADING OR LOCATION IN PROSPECTUS
 ---------------------------------        ---------------------------------
 <S>                                 <C>
 A. INFORMATION ABOUT THE
  TRANSACTION
  1. Forepart of the Registration
      Statement and Outside Front
      Cover Page of Prospectus.....  Outside Front Cover Page
  2. Inside Front and Outside Back
      Cover Pages of Prospectus....  Inside Front Cover Page
  3. Risk Factors, Ratio of
      Earnings to Fixed Charges and  Inside Front Cover Page; Prospectus Summa-
      Other Information............  ry; Selected Consolidated Financial and Op-
                                     erating Information; Special Considerations
                                     Relating to the Debentures
  4. Terms of Transaction..........  Prospectus Summary; Price Range of Common
                                     Stock and Dividends; The Exchange Offer;
                                     Description of Debentures; Description of
                                     Capital Stock; Certain Federal Income Tax
                                     Considerations; Certain Tax Considerations
                                     for Non-United States Persons
  5. Pro Forma Financial
      Information..................  *
  6. Material Contacts with the
      Company Being Acquired.......  *
  7. Additional Information
      Required for Reoffering by
      Persons and Parties Deemed to
      be Underwriters..............  *
  8. Interests of Named Experts and
      Counsel......................  Legal Opinions
  9. Disclosure of Commission
      Position on Indemnification
      for Securities Act
      Liabilities..................  *
 B. INFORMATION ABOUT THE
     REGISTRANT
 10. Information with Respect to S-  Recent Developments; Incorporation of Cer-
      3 Registrants................  tain Documents by Reference
 11. Incorporation of Certain
      Information by Reference.....  Incorporation of Certain Documents by Ref-
                                     erence
 12. Information with Respect to S-
      2 or S-3 Registrants.........  *
 13. Incorporation of Certain
      Information by Reference.....  *
 14. Information with Respect to
      Registrants Other than S-3 or
      S-2 Registrants..............  *
</TABLE>
    
 

<PAGE>
 

<TABLE>
<CAPTION>
       FORM S-4 ITEM NUMBER AND CAPTIONS              HEADING OR LOCATION IN PROSPECTUS
       ---------------------------------              ---------------------------------
<S>                                              <C>
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies..  *
16. Information with Respect to S-2 or S-3
     Companies.................................  *
17. Information with Respect to Companies other
     than S-3 or S-2 Companies.................  *
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
     Authorizations are to be Solicited........  *
19. Information if Proxies, Consents or
     Authorizations are not to be Solicited or
     in an Exchange Offer......................  Incorporation of Certain Documents by Ref-
                                                 erence; The Exchange Offer
</TABLE>

- --------
*Not applicable.

<PAGE>
 
       
                                UAL CORPORATION
 
                               OFFER TO EXCHANGE
               
            6 3/8% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2025     
                                      FOR
                      SERIES A CONVERTIBLE PREFERRED STOCK
 
                               ----------------
 
                  THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
             
          NEW YORK CITY TIME, ON APRIL 3, 1995, UNLESS EXTENDED.     
 
                               ----------------
   
  UAL Corporation, a Delaware corporation (the "Company"), hereby offers, upon
the terms and subject to the conditions set forth in this Prospectus (the
"Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal" which, together with the Prospectus, constitute the "Exchange
Offer"), to exchange up to $600,000,000 aggregate principal amount of
debentures designated as its 6 3/8% Convertible Subordinated Debentures due
2025 (the "Debentures") for up to all shares of the outstanding Series A
Convertible Preferred Stock of the Company (the "Series A Preferred Stock").
The Debentures are offered in minimum denominations of $1,000 and integral
multiples thereof, and the Series A Preferred Stock has a liquidation
preference of $100 per share. Consequently, the Exchange Offer will be effected
on a basis of $1,000 principal amount of Debentures for every ten shares of
Series A Preferred Stock validly tendered and accepted for exchange. The
Company will pay amounts of less than $1,000 due to exchanging stockholders in
cash, in lieu of issuing Debentures with a principal amount of less than
$1,000. Dividends accumulated after January 31, 1995 will not be paid on Series
A Preferred Stock accepted for exchange in the Exchange Offer. In lieu thereof,
holders of Debentures will be entitled to interest from February 1, 1995, as
described below.     
   
  The Company will accept for exchange Series A Preferred Stock validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on April 3,
1995, or if extended by the Company, in its sole discretion, the latest date
and time to which extended (the "Expiration Date"). The Exchange Offer will
expire on the Expiration Date. Tenders of Series A Preferred Stock may be
withdrawn at any time prior to the Expiration Date and, unless accepted for
exchange by the Company, may be withdrawn at any time after forty business days
after the date of this Prospectus. The Company expressly reserves the right to
(i) extend, amend or modify the terms of the Exchange Offer in any manner and
(ii) withdraw or terminate the Exchange Offer and not accept for exchange any
Series A Preferred Stock, at any time for any reason, including (without
limitation) if fewer than 2,000,000 shares of Series A Preferred Stock are
tendered (which condition may be waived by the Company). See "The Exchange
Offer--Expiration Date; Extensions; Amendments; Termination."     
          
  SEE "SPECIAL CONSIDERATIONS RELATING TO THE DEBENTURES" FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER
AND AN INVESTMENT IN THE DEBENTURES, INCLUDING IN THE CASE OF THE DEBENTURES
THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENT OF INTEREST MAY BE
DEFERRED AND CERTAIN RELATED FEDERAL INCOME TAX CONSEQUENCES.     
                                                      
                               ----------------    (Continued on next page)     
 
THESE  SECURITIES HAVE NOT BEEN APPROVED  OR DISAPPROVED BY THE SECURITIES  AND
 EXCHANGE  COMMISSION  OR  BY ANY  STATE  SECURITIES  COMMISSION NOR  HAS  THE
  SECURITIES  AND  EXCHANGE COMMISSION  OR  ANY STATE  SECURITIES  COMMISSION
   PASSED   UPON  THE  ACCURACY   OR  ADEQUACY   OF  THIS   PROSPECTUS.  ANY
    REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
                               ----------------
 
                The Dealer Managers for the Exchange Offer are:
GOLDMAN, SACHS & CO.                                             LEHMAN BROTHERS
 
                               ----------------
                  
               The date of this Prospectus is March 1, 1995     

<PAGE>
 
   
  The Debentures will mature on February 1, 2025 and will bear interest at an
annual rate of 6 3/8% from the first day following the Expiration Date (the
"Issue Date"). In addition, holders of record of the Debentures will be
entitled to interest at a rate of 6 1/4% per annum from February 1, 1995
through the Expiration Date in lieu of dividends accumulating after January 31,
1995 on their Series A Preferred Stock accepted for exchange, payable at the
time of the first interest payment on the Debentures. Interest will be payable
quarterly in arrears on February 1, May 1, August 1, and November 1 of each
year, commencing May 1, 1995, provided that, so long as the Company shall not
be in default in the payment of interest on the Debentures, the Company shall
have the right, upon prior notice by public announcement given in accordance
with New York Stock Exchange, Inc. ("NYSE") rules at any time during the term
of the Debentures, to extend the interest payment period from time to time for
a period not exceeding 20 consecutive calendar quarters (each, an "Extension
Period"). No interest shall be due and payable during an Extension Period, but
at the end of each Extension Period the Company shall pay all interest then
accrued and unpaid on the Debentures, together with interest thereon,
compounded quarterly. Upon the termination of any Extension Period and the
payment of all interest then due, the Company may commence a new Extension
Period. After prior notice by public announcement given in accordance with NYSE
rules, the Company also may prepay at any time all or any portion of the
interest accrued during an Extension Period. Consequently, there could be
multiple Extension Periods of varying lengths throughout the term of the
Debentures. The Company has no current intention of exercising its right to
extend an interest payment period. However, should the Company determine to
exercise such right in the future, the market price of the Debentures is likely
to be affected. See "Special Considerations Relating to the Debentures" and
"Description of Debentures--Interest" and "--Option to Extend Interest Payment
Period."     
   
  Each Debenture is convertible at the option of the holder at any time after
the date of original issuance thereof, unless previously redeemed, into a
combination of cash in the amount of $541.90 per $1,000 principal amount and
common stock of the Company, par value $.01 per share (the "Common Stock"), at
a conversion price of $143.50 (equivalent to approximately 3.192 shares of the
Common Stock per $1000 principal amount of the Debentures). Such conversion
price is subject to adjustment in certain events. See "Description of
Debentures--Conversion." On February 28, 1995, the last reported sale price of
the Common Stock on the NYSE was $94.75 per share.     
 
  The Debentures are redeemable at any time after May 1, 1996 at the option of
the Company, in whole or in part, initially at a redemption price of 104.375%
of the principal amount of the Debentures redeemed, and thereafter at prices
declining ratably to 100% of the principal amount of the Debentures redeemed
from and after May 1, 2003, plus interest accrued and unpaid to the redemption
date. The Company may exercise this redemption option only if for 20 trading
days within any period of 30 consecutive trading days, including the last
trading day, the last sale price of the Company's Common Stock as reported by
the NYSE Composite Transaction Tape exceeds 120% of the conversion price,
subject to adjustment as described herein. No sinking fund will be established
for the payment of the Debentures. See "Description of Debentures--Redemption."
The Debentures are unsecured obligations of the Company and will be subordinate
to all Senior Indebtedness (as defined herein) of the Company. Because the
Company is a holding company that conducts business through its subsidiaries,
the Debentures are also effectively subordinated to all existing and future
obligations of the Company's subsidiaries. On December 31, 1994, approximately
$732 million of such Senior Indebtedness and approximately $13.7 billion of
additional indebtedness, leases and other obligations of the Company's
subsidiaries (net of those obligations of the Company to its subsidiaries that
are included in the definition of Senior Indebtedness (as defined)) not
included in Senior Indebtedness were outstanding. See "Description of
Debentures--Subordination."
 
  For federal income tax purposes, the exchange of Series A Preferred Stock for
Debentures will, depending upon each particular exchanging holder's facts and
circumstances, be treated as either an exchange in which gain or loss is
recognized or as a dividend, and the Debentures will be treated as having been
issued with original issue discount. For a discussion of these and other United
States federal income tax considerations relevant to the Exchange Offer, see
"Certain Federal Income Tax Considerations" and "Certain Federal Tax
Considerations for Non-United States Persons."
   
  The Debentures constitute a new issue of securities with no established
trading market. While the the Debentures have been approved for listing on the
NYSE, subject to official notice of issuance, there can be no assurance that an
active market for the Debentures will develop. The Series A Preferred Stock and
the Common Stock issuable upon conversion of such Series A Preferred Stock have
not been and will not be registered under the Securities Act of 1933, as
amended (the "Securities Act"), and are subject to certain restrictions on
transfer provided for therein and pursuant to their terms at original issuance.
Such restrictions will continue to apply to the Series A Preferred Stock and
the Common Stock issuable upon conversion of such Series A Preferred Stock that
is not exchanged for Debentures. Moreover, to the extent that Series A
Preferred Stock is tendered and accepted in the Exchange Offer, a holder's
ability to sell untendered Series A Preferred Stock could be adversely
affected.     
   
  D.F. King & Co., Inc. has been retained by the Company to act as Information
Agent to assist in connection with the Exchange Offer.     
 
                                       2

<PAGE>
 
   
  NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE RESPECTIVE DATES OF
WHICH INFORMATION IS GIVEN HEREIN. THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR
WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS (AS DEFINED BELOW) OF
SERIES A PREFERRED STOCK IN ANY JURISDICTION IN WHICH THE MAKING OF THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
LAWS OF SUCH JURISDICTION. HOWEVER, THE COMPANY MAY, AT ITS DISCRETION, TAKE
SUCH ACTION AS IT MAY DEEM NECESSARY TO MAKE THE EXCHANGE OFFER IN ANY SUCH
JURISDICTION AND EXTEND THE EXCHANGE OFFER TO HOLDERS OF SERIES A PREFERRED
STOCK IN SUCH JURISDICTION. IN ANY JURISDICTION THE SECURITIES LAWS OR BLUE SKY
LAWS OF WHICH REQUIRE THE EXCHANGE OFFER TO BE MADE BY A LICENSED BROKER OR
DEALER, THE EXCHANGE OFFER IS BEING MADE ON BEHALF OF THE COMPANY BY THE DEALER
MANAGERS OR ONE OR MORE REGISTERED BROKERS OR DEALERS WHICH ARE LICENSED UNDER
THE LAWS OF SUCH JURISDICTION.     
       
                             AVAILABLE INFORMATION
 
  The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information concerning the Company can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, Room 1024;
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511; and 7 World Trade Center, Suite 1300 New York, New York 10048. Copies of
such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Such material can also be inspected and copied at the offices of the
NYSE, 20 Broad Street, New York, New York 10005; the Chicago Stock Exchange,
440 South LaSalle Street, Chicago, Illinois 60605; and the Pacific Stock
Exchange, 301 Pine Street, San Francisco, California 94104 or 618 South Spring
Street, Los Angeles, California 90014.
 
  This Prospectus constitutes a part of a registration statement on Form S-4
(together with all amendments and exhibits, the "Registration Statement") filed
by the Company with the Commission under the Securities Act. This Prospectus
does not contain all of the information included in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. Statements contained herein concerning the provisions of any
document do not purport to be complete and, in each instance, are qualified in
all respects by reference to the copy of such document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission. Each such
statement is subject to and qualified in its entirety by such reference.
Reference is made to such Registration Statement and to the exhibits relating
thereto for further information with respect to the Company and the securities
offered hereby.
 
                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
 
  The following documents have been filed with the Commission and are
incorporated herein by reference (Commission File No. 1-6033):
 
    1. The Company's Annual Report on Form 10-K for the year ended December
  31, 1993, as amended.
 
    2. The Company's Quarterly Reports on Form 10-Q for the periods ended
  March 31, 1994, as amended, June 30, 1994 and September 30, 1994.
     
    3. The Company's Current Reports on Form 8-K dated February 4, 1994 (3
  reports), March 25, 1994 (2 reports), April 27, 1994, April 28, 1994, May
  3, 1994, June 2, 1994, June 10, 1994, June 15, 1994, June 29, 1994, July 8,
  1994, July 11, 1994, July 12, 1994 (2 reports) and February 28, 1995.     
 
                                       3

<PAGE>
 
    4. A description of the Company's Common Stock and Rights that are
  attached to the Common Stock, as contained in the Company's Proxy
  Statement/Joint Prospectus dated June 10, 1994 filed pursuant to Rule
  424(b) under the Securities Act under the caption "Description of
  Securities--the Common Stock, the Series A Preferred Stock and the Junior
  Participating Preferred Stock."
 
  All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the securities offered hereby shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated herein by reference shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified and superseded, to
constitute a part of this Prospectus.
   
  THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH
PERSON, INCLUDING ANY BENEFICIAL OWNER OF THE SERIES A PREFERRED STOCK, TO WHOM
THIS PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON,
A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED HEREIN BY
REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). THESE DOCUMENTS
ARE AVAILABLE UPON REQUEST FROM UAL CORPORATION, P.O. BOX 66919, CHICAGO,
ILLINOIS 60666 (TELEPHONE NUMBER (708) 952-4000), ATTENTION: FRANCESCA M.
MAHER, SECRETARY. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST SHOULD BE MADE NOT LATER THAN FIVE BUSINESS DAYS PRIOR TO THE
EXPIRATION DATE.     
   
  Like many other carriers, United overflies Cuba in order to serve other
destinations in Central and South America and the Caribbean and is required by
the Cuban government to pay fees for such overflight which United does pursuant
to a license which it has obtained from the U.S. government. This information
is accurate as of the date of this Prospectus and current information
concerning business dealings of United with the government of Cuba or with any
person or affiliate located in Cuba may be obtained from the Florida Department
of Banking and Finance, Plaza Level, The Capitol, Tallahassee, Florida 32399-
0350, telephone number (904) 488-9530.     
                                
                             TABLE OF CONTENTS     
 

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
Available Information......................................................   3
Incorporation of Certain Documents by Reference............................   3
Prospectus Summary.........................................................   5
Special Considerations Relating to the Debentures..........................  11
The Company................................................................  14
Recent Developments........................................................  14
Price Range of Common Stock and Dividends..................................  15
Capitalization.............................................................  16
Selected Consolidated Financial and Operating Information..................  17
The Exchange Offer.........................................................  18
Description of Debentures..................................................  25
Description of Capital Stock...............................................  39
Certain Federal Income Tax Considerations..................................  64
Certain Federal Tax Considerations for Non-United States Persons...........  68
Legal Matters..............................................................  72
Experts....................................................................  72
</TABLE>

 
                                       4

<PAGE>
 
                               PROSPECTUS SUMMARY
 
  The following summary does not purport to be complete and is qualified in its
entirety by the detailed information contained elsewhere in this Prospectus or
by documents incorporated by reference into this Prospectus.
 
                                  THE COMPANY
   
  UAL Corporation, a Delaware corporation (the "Company"), is a holding company
and its primary subsidiary is United Air Lines, Inc., a Delaware corporation
("United"), which is wholly owned. At the end of 1994, United served 152
airports in the United States and 29 foreign countries. During 1994, United
averaged 2,004 departures daily, flew a total of 108 billion revenue passenger
miles and carried an average of 203,400 passengers per day. At the end of 1994,
United's fleet of aircraft totaled 543. United's major hub operations are
located at Chicago, Denver, San Francisco, Washington, D.C. and Tokyo.     
 
                               THE EXCHANGE OFFER
 
PURPOSE OF EXCHANGE OFFER
 
  The principal purpose of the Exchange Offer is to improve the Company's
after-tax cash flow by replacing the Series A Preferred Stock (as defined
below) with the Debentures (as defined below). The potential cash flow benefit
to the Company arises because interest payable on the Debentures should be
deductible by the Company for federal income tax purposes, while dividends
payable on the Series A Preferred Stock are not deductible. See "The Exchange
Offer--Purpose of the Exchange Offer."
 
THE EXCHANGE OFFER; SECURITIES OFFERED
   
  Upon the terms and subject to the conditions set forth herein and in the
Letter of Transmittal, the Company hereby offers to exchange up to $600,000,000
aggregate principal amount of Debentures designated as its 6 3/8% Convertible
Subordinated Debentures due 2025 (the "Debentures") for up to all of the
outstanding shares of Series A Convertible Preferred Stock (the "Series A
Preferred Stock"). Exchanges will be made on a basis of $1,000 principal amount
of Debentures (the minimum permitted denomination) for every ten shares of
Series A Preferred Stock validly tendered and accepted for exchange in the
Exchange Offer. The Company will pay amounts of less than $1,000 due to any
exchanging stockholder in cash, in lieu of issuing Debentures with a principal
amount of less than $1,000. See "The Exchange Offer--Terms of the Exchange
Offer."     
   
  The Debentures will mature on February 1, 2025 and will bear interest at an
annual rate of 6 3/8% from the first day following the Expiration Date (the
"Issue Date") or from the most recent interest payment date to which interest
has been paid or duly provided for. Interest will be payable quarterly in
arrears on February 1, May 1, August 1 and November 1 of each year, commencing
May 1, 1995, provided that, so long as the Company shall not be in default in
the payment of interest on the Debentures, the Company shall have the right,
upon prior notice by public announcement given in accordance with NYSE rules at
any time during the term of the Debentures, to extend any interest payment
period from time to time for a period not exceeding 20 consecutive calendar
quarters. The Company has no current intention of exercising its right to
extend any interest payment period. However, should the Company determine to
exercise such right in the future, the market price of the Debentures is likely
to be affected. See "Special Considerations Relating to the Debentures" and
"Description of Debentures--Option to Extend Interest Payment Period."     
       
                                       5

<PAGE>
 
   
  Dividends accumulated after January 31, 1995 will not be paid on Series A
Preferred Stock accepted for exchange in the Exchange Offer. In lieu thereof,
holders of record of the Debentures will be entitled to interest at a rate of 6
1/4% per annum from February 1, 1995 through the Expiration Date, payable at
the time of the first interest payment on the Debentures. The Debentures will
be issued pursuant to an indenture, to be dated as of April 3, 1995, between
the Company and The Bank of New York, as trustee. See "Description of
Debentures."     
 
EXPIRATION DATE; WITHDRAWALS
   
  The Company will accept for exchange Series A Preferred Stock, validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on April 3,
1995, or if extended by the Company, in its sole discretion, the latest date
and time to which extended (the "Expiration Date"). The Exchange Offer will
expire on the Expiration Date. Tenders of Series A Preferred Stock pursuant to
the Exchange Offer may be withdrawn at any time prior to the Expiration Date
and, unless accepted for exchange by the Company, may be withdrawn at any time
after forty business days after the date of this Prospectus. See "The Exchange
Offer--Withdrawal of Tenders" and "--Expiration Date; Extensions; Amendments;
Termination."     
 
EXTENSIONS, AMENDMENTS AND TERMINATION
   
  The Company expressly reserves the right to (i) extend, amend or modify the
terms of the Exchange Offer in any manner and (ii) withdraw or terminate the
Exchange Offer and not accept for exchange any Series A Preferred Stock, at any
time for any reason, including (without limitation) if fewer than 2,000,000
shares of Series A Preferred Stock are tendered (which condition may be waived
by the Company). See "The Exchange Offer--Expiration Date; Extensions;
Amendments; Termination."     
 
PROCEDURES FOR TENDERING
   
  Each Holder of the Series A Preferred Stock wishing to accept the Exchange
Offer must (i) properly complete and sign the Letter of Transmittal or a
facsimile thereof (all references in this Prospectus to the Letter of
Transmittal shall be deemed to include a facsimile thereof) in accordance with
the instructions contained herein and therein, together with any required
signature guarantees, and deliver the same to The Bank of New York, as Exchange
Agent, at either of its addresses set forth in "The Exchange Offer--Exchange
Agent and Information Agent" and either (a) certificates for the Series A
Preferred Stock must be received by the Exchange Agent at such address or (b)
such Series A Preferred Stock must be transferred pursuant to the procedures
for book-entry transfer described herein and a confirmation of such book-entry
transfer must be received by the Exchange Agent, in each case prior to the
Expiration Date or (ii) comply with the guaranteed delivery procedures
described herein. See "The Exchange Offer--General" and "--Procedures for
Tendering."     
 
SPECIAL PROCEDURES FOR BENEFICIAL OWNERS
 
  Any beneficial owner whose Series A Preferred Stock is registered in the name
of a broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on its own behalf, such owner must, prior to
completing and executing a Letter of Transmittal and delivering its Series A
Preferred Stock, either make appropriate arrangements to register ownership of
the Series A Preferred Stock in such owner's name or obtain a properly
completed stock power from the registered holder. The transfer of registered
ownership may take considerable time and may not be able to be completed prior
to the Expiration Date. See "The Exchange Offer--Procedures for Tendering--
Signature Guarantee."
 
                                       6

<PAGE>
 
 
GUARANTEED DELIVERY PROCEDURES
 
  If a Holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Series A Preferred Stock to reach the Exchange Agent
before the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected in accordance with the
guaranteed delivery procedures set forth in "The Exchange Offer--Procedures for
Tendering--Guaranteed Delivery."
 
ACCEPTANCE OF SHARES AND DELIVERY OF DEBENTURES
 
  Upon the terms and subject to the conditions of the Exchange Offer, including
the reservation by the Company of the right to withdraw or terminate the
Exchange Offer and certain other rights, the Company will accept for exchange
shares of Series A Preferred Stock that are properly tendered in the Exchange
Offer and not withdrawn prior to the Expiration Date. Subject to such terms and
conditions, the Debentures issued pursuant to the Exchange Offer will be issued
as of the Issue Date and will be delivered as promptly as practicable following
the Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer" and
"--Expiration Date; Extensions; Amendments; Termination."
 
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
 
  The exchange of Series A Preferred Stock for Debentures pursuant to the
Exchange Offer will be a taxable event. Depending on each exchanging
stockholder's particular facts and circumstances, the exchange may be treated
as (i) a transaction in which gain or loss will be recognized in an amount
equal to the difference between the fair market value of the Debentures
received in the exchange and the exchanging stockholder's tax basis in the
share of Series A Preferred Stock surrendered or (ii) a distribution taxable as
a dividend in an amount equal to the fair market value of the Debentures
received by such exchanging stockholder. See "Certain Federal Income Tax
Considerations" and "Certain Federal Tax Considerations for Non-United States
Persons."
 
  In the event an Extension Period occurs, holders of the Debentures would
continue under the original issue discount rules to accrue income corresponding
to stated interest on the Debentures for United States federal income tax
purposes. As a result, a holder ordinarily would include such amounts in gross
income in advance of the receipt of cash. A holder that disposes of its
Debentures prior to the record date for payment of interest at the end of an
Extension Period will not receive cash from the Company related to such
interest because such interest will be paid to the holder of record on such
record date, regardless of who the holders of record may have been on other
dates during the Extension Period. The extent to which such a holder would
receive a return on the Debentures for the period it held such Debentures will
depend on the market for the Debentures at the time of disposition. In
addition, under the original issue discount rules, a holder will, in effect, be
required to accrue the difference between the fair market value of the
Debentures at the time of the exchange and the stated principal amount as
interest income over the term of the Debentures. See "Certain Federal Income
Tax Considerations--Interest and Original Issue Discount on Debentures."
 
UNTENDERED SHARES
 
  Holders of Series A Preferred Stock who do not tender their Series A
Preferred Stock in the Exchange Offer or whose Series A Preferred Stock is not
accepted for exchange will continue to hold such Series A Preferred Stock and
will be entitled to all the rights and preferences, and will be subject to all
of the limitations, applicable thereto, including without limitation the
existing restrictions on transfer under the Securities Act. See "The Exchange
Offer--Listing and Trading of Debentures and Series A Preferred Stock; Transfer
Restrictions."
 
                                       7

<PAGE>
 
   
EXCHANGE AGENT AND INFORMATION AGENT     
   
  The Bank of New York has been appointed as Exchange Agent in connection with
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notices of Guaranteed Delivery should be directed to D.F. King &
Co., Inc., which has been retained by the Company to act as Information Agent
for the Exchange Offer. The addresses and telephone numbers of the Exchange
Agent and Information Agent are set forth in "The Exchange Offer--Exchange
Agent and Information Agent."     
 
DEALER MANAGERS
   
  Goldman, Sachs & Co. and Lehman Brothers Inc. have been retained as Dealer
Managers to solicit exchanges of Series A Preferred Stock for Debentures.
Questions with respect to the Exchange Offer may be directed to Goldman Sachs &
Co. at (800) 323-5678 and to Lehman Brothers Inc., Equity Syndicate Desk, at
(800) 524-4462.     
 
COMPARISON OF DEBENTURES AND SERIES A PREFERRED STOCK
 
  The following is a brief summary comparison of certain of the principal terms
of the Debentures and the Series A Preferred Stock.
 

<TABLE>
<CAPTION>
                                    DEBENTURES                SERIES A PREFERRED STOCK
                                    ----------                ------------------------
<S>                      <C>                              <C>
Interest/Dividend Rate.. 6 3/8% annual interest from the  6 1/4% annual dividend, payable
                         Issue Date (6 1/4% per annum for quarterly in arrears out of
                         the period from February 1       funds legally available therefor
                         through the Expiration Date)     on February 1, May 1, August 1
                         payable quarterly in arrears on  and November 1 of each year,
                         February 1, May 1, August 1 and  when, as and if declared by the
                         November 1 of each year, com-    Company's Board of Directors
                         mencing May 1, 1995, subject to  (the "Board"). All dividends on
                         the Company's right to extend    the Series A Preferred Stock
                         the interest payment period from have been paid to date. In the
                         time to time to a period of up   event dividends are not paid on
                         to 20 consecutive calendar quar- a dividend payment date in the
                         ters, as described herein. At    future, holders would not be en-
                         the end of each Extension Period titled to receive interest on
                         the Company shall pay to the     any dividend arrearages.
                         holders all interest then ac-
                         crued and unpaid, together with
                         interest thereon, compounded
                         quarterly, at the rate of inter-
                         est on the Debentures.
Conversion.............. Convertible into a combination   Convertible into a combination
                         of cash in the amount of $541.90 of cash in the amount of $54.19
                         and approximately 3.192 shares   and approximately 0.3195 shares
                         of Common Stock (equivalent to a of Common Stock per each share
                         Conversion Price of $143.50 per  of Series A Preferred Stock
                         share of Common Stock) per       (equivalent to a Conversion
                         $1,000 principal amount of De-   Price of $143.38 per share of
                         bentures converted, subject to   Common Stock), giving effect to
                         adjustment as described herein.  the adjustment to the considera-
                                                          tion deliverable upon conversion
                                                          of the Series A Preferred Stock
                                                          resulting from the recapitaliza-
                                                          tion of the Company (the "Recap-
                                                          italization") on July 12, 1994
                                                          and subject to further adjust-
                                                          ment as described herein.
</TABLE>

 
 
                                       8

<PAGE>
 

<TABLE>
<CAPTION>
                                   DEBENTURES               SERIES A PREFERRED STOCK
                                   ----------               ------------------------
<S>                      <C>                             <C>
Optional Redemption..... Redeemable at the option of the Redeemable at the option of the
                         Company at any time on or after Company at any time on or after
                         May 1, 1996, in whole or in     May 1, 1996, in whole or in
                         part, initially at a redemption part, initially at a redemption
                         price of 104.375% of the prin-  price of 104.375% of the liqui-
                         cipal amount of the Debentures  dation preference of the Series
                         redeemed, declining ratably to  A Preferred Stock redeemed, de-
                         100% of the principal amount of clining ratably to 100% of the
                         the Debentures redeemed from    liquidation preference of the
                         and after May 1, 2003, in each  Series A Preferred Stock re-
                         case plus accrued and unpaid    deemed from and after May
                         interest to the date fixed for  1, 2003, in each case plus ac-
                         redemption. The Company may ex- cumulated and unpaid dividends
                         ercise this redemption option   to the date fixed for redemp-
                         ONLY IF for 20 trading days     tion.
                         within any period of 30 consec-
                         utive trading days, including
                         the last trading day, the last
                         sale price of the Company Com-
                         mon Stock as reported by the
                         NYSE Composite Transaction Tape
                         exceeds 120% of the Conversion
                         Price, subject to adjustment as
                         described herein.
Subordination........... Subordinated to all existing    Subordinate to claims of credi-
                         and future Senior Indebtedness  tors, including holders of the
                         of the Company, and effectively Company's outstanding debt se-
                         subordinated to all obligations curities and the Debentures,
                         of the Company's subsidiaries,  and effectively subordinated to
                         but senior to all Preferred     all obligations of the
                         Stock of the Company, including Company's subsidiaries, but on
                         the Series A Preferred Stock,   parity with the Series B Pre-
                         and to the Common Stock. On De- ferred Stock and senior to all
                         cember 31, 1994, approximately  other issued and outstanding
                         $732 million of such Senior In- preferred stock of the Company
                         debtedness and approximately    and the Common Stock.
                         $13.7 billion of additional in-
                         debtedness, leases and other
                         obligations of the Company's
                         subsidiaries (net of those ob-
                         ligations of the Company to its
                         subsidiaries that are included
                         in the definition of Senior In-
                         debtedness) not included in Se-
                         nior Indebtedness were out-
                         standing.
Voting Rights........... None.                           None, except in certain circum-
                                                         stances.
</TABLE>

 
 
                                       9

<PAGE>
 

<TABLE>
<CAPTION>
                                   DEBENTURES               SERIES A PREFERRED STOCK
                                   ----------               ------------------------
<S>                      <C>                             <C>
Transfer Restrictions;   The Debentures and the Common   The Series A Preferred Stock
New York Stock Exchange  Stock issuable upon conversion  and the Common Stock issuable
Listing................. thereof have been registered    upon conversion of such Series
                         under the Securities Act and    A Preferred Stock have not been
                         will be transferable to the ex- and will not be registered un-
                         tent permitted thereunder. The  der the Securities Act. The Se-
                         Debentures and the Common Stock ries A Preferred Stock has not
                         issuable upon conversion        been and will not be listed on
                         thereof have been approved for  the NYSE. The Series A Pre-
                         listing on the NYSE, subject to ferred Stock and the Common
                         official notice of issuance.    Stock issuable upon conversion
                                                         thereof are subject to certain
                                                         significant restrictions on
                                                         their transfer under the Secu-
                                                         rities Act and pursuant to
                                                         their terms at original issu-
                                                         ance and unexchanged Series A
                                                         Preferred Stock and the Common
                                                         Stock issued upon conversion
                                                         thereof will remain subject to
                                                         such transfer restrictions. Un-
                                                         der Rule 144 under the Securi-
                                                         ties Act as in effect on the
                                                         date hereof ("Rule 144"), be-
                                                         ginning February 12, 1996, the
                                                         Series A Preferred Stock and
                                                         the Common Stock issuable upon
                                                         conversion thereof which is not
                                                         (and has not been) held by an
                                                         affiliate of the Company will
                                                         no longer be subject to these
                                                         limitations.
Dividends Received       Interest will not be eligible   Dividends are eligible for the
Deduction............... for the dividends received de-  dividends received deduction
                         duction for corporate stock-    for corporate stockholders.
                         holders.
</TABLE>

 
                                       10

<PAGE>
 
               SPECIAL CONSIDERATIONS RELATING TO THE DEBENTURES
 
  Prospective exchanging stockholders should carefully consider, in addition to
the other information set forth elsewhere in this Prospectus, the following:
 
RIGHT OF COMPANY TO DEFER PAYMENT OF INTEREST
 
  So long as the Company shall not be in default in the payment of interest on
the Debentures, the Company shall have the right, upon prior notice by public
announcement given in accordance with NYSE rules at any time during the term of
the Debentures, to extend any interest payment period from time to time for a
period not exceeding 20 consecutive calendar quarters (each, an "Extension
Period"). No interest shall be due and payable during an Extension Period, but
on the interest payment date occurring at the end of each Extension Period the
Company shall pay to the holders of record on the record date for such interest
payment date (regardless of who the holders of record may have been on other
dates during the Extension Period) all accrued and unpaid interest on the
Debentures, together with interest thereon, compounded quarterly.
 
  Upon the termination of any Extension Period and the payment of all interest
then due, the Company may commence a new Extension Period. After prior notice
given by public announcement in accordance with NYSE rules, the Company may
also prepay at any time all or a portion of the interest accrued during an
Extension Period. Consequently, there could be multiple Extension Periods of
varying lengths throughout the term of the Debentures. See "Description of
Debentures--Option to Extend Interest Payment Period."
 
  The Company has no current intention of exercising its right to defer any
interest payment period.
 
NO CASH PAYMENTS DURING EXTENSION PERIOD TO PAY ACCRUED TAX LIABILITY
 
  In the event an Extension Period occurs, holders of the Debentures would
continue under the original issue discount rules to accrue income corresponding
to stated interest on the Debentures for U.S. federal income tax purposes. As a
result, a holder ordinarily would include such amounts in gross income in
advance of the receipt of cash. A holder that disposes of its Debentures prior
to the record date for payment of interest at the end of an Extension Period
will not receive cash from the Company related to such interest because such
interest will be paid to the holder of record on such record date, regardless
of who the holders of record may have been on other dates during the Extension
Period. The extent to which such a holder would receive a return on the
Debentures for the period it held such Debentures will depend on the market for
the Debentures at the time of disposition. See "Certain Federal Income Tax
Considerations--Interest and Original Issue Discount on Debentures."
 
SUBORDINATION OF DEBENTURES
   
  The Debentures are unsecured obligations of the Company and will be
subordinate to all Senior Indebtedness of the Company. Because the Company is a
holding company that conducts business through its subsidiaries, the Debentures
will also be effectively subordinated to all existing and future obligations of
the Company's subsidiaries. On December 31, 1994, approximately $732 million of
such Senior Indebtedness and approximately $13.7 billion of additional
indebtedness, leases and other obligations of the Company's subsidiaries (net
of those obligations of the Company to its subsidiaries that are included in
the definition of Senior Indebtedness) not included in Senior Indebtedness were
outstanding. See "Description of Debentures--Subordination."     
 
POTENTIAL MARKET VOLATILITY DURING EXTENSION PERIOD
 
  As described above, the Company has the right to extend an interest payment
period from time to time for a period not exceeding 20 consecutive calendar
quarters. In the event the Company determines
 
                                       11

<PAGE>
 
to extend an interest payment period, or in the event the Company thereafter
extends an Extension Period or prepays interest accrued during an Extension
Period as described above, the market price of the Debentures is likely to be
affected. In addition, as a result of such rights, the market price of the
Debentures may be more volatile than other debt instruments with original issue
discount that do not have such rights. A holder that disposes of its Debentures
during an Extension Period, therefore, may not receive the same return on its
investment as a holder that continues to hold its Debentures. See "Description
of Debentures--Option to Extend Interest Payment Period."
 
CASH CONVERSION CONSIDERATION NOT ESCROWED
   
  Upon conversion of the Series A Preferred Stock or the Debentures, the holder
of the Series A Preferred Stock or the Debentures, as the case may be, is
entitled to receive $54.19 for each share of Series A Preferred Stock or
$541.90 for each $1,000 principal amount of Debentures such holder converts, in
addition to the Common Stock receivable upon such conversion. The Company is
not obligated to and has not set aside or escrowed any cash to be issued in
connection with such conversions and there can be no assurance that a
sufficient amount of cash will be available at the time that a holder elects to
convert its shares of Series A Preferred Stock or Debentures. If all of the
outstanding untendered Series A Preferred Stock and all of the Debentures
offered hereby are converted into Common Stock, the Company would be required
to pay an aggregate of approximately $325 million to the holders of the Series
A Preferred Stock and the Debentures upon conversion. The Company's
consolidated cash, cash equivalents and short-term investments at December 31,
1994 aggregated approximately $1.5 billion.     
 
EXCHANGE OFFER AS TAXABLE EVENT
 
  The exchange of Series A Preferred Stock for Debentures pursuant to the
Exchange Offer will be a taxable event. Depending on each exchanging
stockholder's particular facts and circumstances, the exchange may be treated
as (i) a transaction in which gain or loss will be recognized in an amount
equal to the difference between the fair market value of the Debentures
received in the exchange and the exchanging stockholder's tax basis in the
shares of Series A Preferred Stock surrendered or (ii) a distribution taxable
as a dividend in an amount equal to the fair market value of the Debentures
received by such exchanging stockholder. See "Certain Federal Income Tax
Considerations" and "Certain Federal Tax Considerations for Non-United States
Persons." All holders of Series A Preferred Stock are advised to consult their
own tax advisors regarding the federal, state, local and foreign tax
consequences of the exchange of Series A Preferred Stock.
 
ORIGINAL ISSUE DISCOUNT
 
  Under the original issue discount rules, a holder will, in effect, be
required to accrue the difference between the fair market value of the
Debentures at the time of the exchange and the stated principal amount as
interest income over the term of the Debentures. See "Certain Federal Income
Tax Considerations--Interest and Original Issue Discount on Debentures."
   
RECENT RECAPITALIZATION     
   
  The Company's recapitalization completed in July 1994, resulted in a new
labor agreement for certain employee groups and a new corporate governance
structure, which was designed to achieve balance between the various employee-
owner groups and public shareholders. The Company's restated certificate of
incorporation (the "Restated Certificate") provides, among other things, that
until the Sunset (as defined under "Description of Capital Stock--Corporate
Governance--Sunset"), the Company's board of directors (the "Board") and
committees thereof must consist of directors elected by certain classes of
stockholders and that Board actions must be approved by specified numbers of
directors, including, in some cases, directors elected by the employee groups.
The new labor agreements and new corporate governance structure could inhibit
management's ability to alter strategy in a volatile, competitive industry by
restricting certain operating and financing activities, including the sale of
assets and the issuance of equity securities and the ability to furlough
employees.     
 
                                       12

<PAGE>
 
   
The Company's ability to react to competition may be hampered further by the
fixed long-term nature of these various agreements. The success of the
recapitalization is dependent upon a number of factors, including the state of
the competitive environment in the airline industry, competitive response to
United's efforts, United's ability to achieve enduring cost savings through
productivity improvements and the renegotiation of labor agreements at the end
of the investment period. See "Recent Developments" and "Description of Capital
Stock--Corporate Governance."     
   
REDUCTION IN SHAREHOLDERS' EQUITY RESULTING FROM EXCHANGE OFFER     
   
  To the extent that shares of Series A Preferred Stock are exchanged for
Debentures, the Company's shareholders' equity will be reduced. If all of the
outstanding shares of Series A Preferred Stock were exchanged for Debentures,
on a pro forma basis at December 31, 1994, shareholders' equity would have been
reduced by approximately $525 million, from a deficit of $316 million to a
deficit of $841 million. A reduction in the level of shareholders' equity could
be viewed negatively by financial institutions which may limit the Company's
ability to effect future financings. A reduction in shareholders' equity could
also affect the Company's ability to pay dividends on the Company's outstanding
capital stock, including the Series A Preferred Stock. The Delaware General
Corporation Law (the "DGCL") requires that dividends may only be made from
surplus or the net profits of the Company for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. For purposes of the
DGCL, surplus equals the excess, if any, at any given time, of the net assets
of the corporation over stated capital. Since the Exchange Offer would increase
the Company's indebtedness and reduce shareholders' equity, the Company's
ability to pay dividends could be reduced. In addition, dividends may not be
paid if, after giving effect to such dividends, the Company would not be able
to pay its debts as they become due in the usual course of business.     
   
FAIR VALUE CONSIDERATIONS     
   
  The Debentures will be senior to any Series A Preferred Stock not tendered in
the Exchange Offer and the interest rate on the Debentures will be higher than
the dividend rate on the Series A Preferred Stock. Under fraudulent transfer
law, if a court in a lawsuit by an unpaid creditor or a representative of
creditors, such as a trustee in bankruptcy, were to find that the Company
received less than fair consideration or reasonably equivalent value for
incurring the indebtedness represented by the Debentures in exchange for the
Series A Preferred Stock and, at the time of such incurrence, the Company (i)
was insolvent or was rendered insolvent by reason of such incurrence, (ii) was
engaged in or about to engage in a business or transaction for which its
remaining property constituted unreasonably small capital or (iii) intended to
incur, or believed it would incur, debts beyond its ability to pay as they
mature, a court could (a) void the Company's obligations, and certain payments
made, to the holders of the Debentures and thereby place holders of the
Debentures in the same position they would have occupied if they had continued
to hold Series A Preferred Stock and/or (b) subordinate the Debentures to any
other existing and future indebtedness of the Company which is not already
senior to the Debentures, in effect entitling such other creditors to be paid
in full before any payment could be made on the Debentures. Generally, a debtor
is considered insolvent if its liabilities exceed the fair value of its
property, or if the present fair saleable value of its assets is less than the
amount required to repay its debts as they mature. The Company believes that
the Exchange Offer is in its reasonable business interests and is for fair
consideration and reasonably equivalent value. If a court were to subordinate
the obligations on the Debentures to the claims of all other applicable
creditors of the Company as a result of such findings, however, the Company
anticipates that such subordination would not subordinate the Debentures to a
position that is inferior to the position of the Series A Preferred Stock.     
 
                                       13

<PAGE>
 
                                  THE COMPANY
   
  The Company is a holding company and its primary subsidiary is United, which
is wholly owned. At the end of 1994, United served 152 airports in the United
States and 29 foreign countries. During 1994, United averaged 2,004 departures
daily, flew a total of 108 billion revenue passenger miles and carried an
average of 203,400 passengers per day. At the end of 1994, United's fleet of
aircraft totaled 543. United's major hub operations are located at Chicago,
Denver, San Francisco, Washington, D.C., and Tokyo.     
 
                              RECENT DEVELOPMENTS
 
RECAPITALIZATION
   
  On July 12, 1994, the stockholders of the Company approved a plan of
recapitalization that provides an approximately 55% equity and voting interest
in the Company to certain employees of United in exchange for wage concessions
and work-rule changes. The employees' equity interest will be allocated to
individual employee accounts through the year 2000 under Employee Stock
Ownership Plans ("ESOPs") which were created as a part of the Recapitalization.
Since the ESOP shares will be allocated over time, the current ownership
interest held by employees is substantially less than 55%. The entire 55% ESOP
voting interest is currently exercisable, which generally will be voted by the
ESOP trustee at the direction of, and on behalf of, the employees participating
in the ESOPs. The employee interest may increase to up to 63%, depending on the
average market value of a share of Common Stock between July 13, 1994 and July
12, 1995. Based on the average market value of a share of Common Stock through
February 23, 1995, the market value of Common Stock for the remainder of the
measuring period would have to average at least $204 for any adjustment to be
made in the ESOP percentage interest. In connection with the Recapitalization,
holders of the Company's old common stock received approximately $2.1 billion
in cash and the remaining 45% (subject to reduction, as described above, to not
less than 37%) of the equity in the form of Common Stock. Each share of old
common stock was converted into 0.5 shares of Common Stock (with cash in lieu
of fractional shares) plus a cash payment of $84.81. The conversion of certain
convertible securities (including the Series A Preferred Stock) and the
exercise of certain stock options could result in additional cash distributions
of up to $428 million, based on the amount of convertible securities and stock
options outstanding on December 31, 1994. Distributions on account of stock
option exercises would be reduced by cash proceeds on the exercise of the
options. In connection with the Recapitalization, United issued $370 million of
10.67% debentures due in 2004 (the "10.67% Debentures") and $371 million of
11.21% Debentures due in 2014 (the "11.21% Debentures") and the Company issued
series B 12 1/4% preferred stock (the "Series B Preferred Stock") with an
aggregate liquidation preference of $410 million. Approximately $169 million of
pretax costs were incurred in connection with the Recapitalization, including
transaction costs and severance payments to certain former United employees.
    
  The Delaware Court of Chancery, after a fairness hearing on January 24, 1995,
approved the proposed settlement of two stockholder class actions challenging
the Recapitalization and awarded the plaintiffs $5.1 million in costs and
attorneys' fees.
 
                                       14

<PAGE>
 
                   PRICE RANGE OF COMMON STOCK AND DIVIDENDS
 
  The Common Stock is traded principally on the NYSE, and are also listed on
the Chicago Stock Exchange and the Pacific Stock Exchange. The following sets
forth for the periods indicated the high and low closing sales prices per share
of the Company's old common stock outstanding immediately prior to the
Recapitalization and of the Common Stock on the NYSE Composite Tape.
 

<TABLE>       
<CAPTION>
                                                           HIGH     LOW
                                                          ------- -------
      <S>                                                 <C>     <C>
      OLD COMMON STOCK:
        1993
          First Quarter.................................. 132 1/4 110 3/4
          Second Quarter................................. 149 3/4 118
          Third Quarter.................................. 150 1/2 121 5/8
          Fourth Quarter................................. 155 1/2 135 7/8
        1994
          First Quarter.................................. 150     123 3/4
          Second Quarter................................. 130 1/2 115 1/8
          Third Quarter (through July 12).................130.1/2 125 1/2
      COMMON STOCK:
        1994
          Third Quarter (from July 13)....................105.     86 3/4
          Fourth Quarter.................................  96 7/8  83 1/8
        1995
          First Quarter (through February 28)............  99 5/8  89 1/2
</TABLE>
    
 
  For a recent last reported sales price of the Common Stock on the NYSE, see
the cover page of this Prospectus.
 
  The Recapitalization was consummated on July 12, 1994. In connection with the
Recapitalization, holders of the Company's old common stock received one-half
of a share of Common Stock and $84.81 for each share of old common stock. As a
result of the foregoing, the price per share of old common stock is not
comparable to the price per share of the Common Stock.
 
  The Company has not paid cash dividends on its common stock since 1987. The
payment of any future dividends on the Common Stock and the amount thereof will
be determined by the Board in light of earnings, the financial condition of the
Company and other relevant factors.
 
                                       15

<PAGE>
 
                                 CAPITALIZATION
   
  The following table sets forth the consolidated capitalization of the Company
at December 31, 1994 and as adjusted to give effect to the Exchange Offer
(assuming that 50% and 100% of the outstanding shares of the Series A Preferred
Stock are exchanged).     
 

<TABLE>
<CAPTION>
                                                   DECEMBER 31, 1994
                                         --------------------------------------
                                                        AS ADJUSTED
                                                 --------------------------
                                                   ASSUMING     ASSUMING
                                         ACTUAL  50% EXCHANGE 100% EXCHANGE
                                         ------  ------------ -------------
                                                 (DOLLARS IN MILLIONS)
<S>                                      <C>     <C>          <C>           <C>
Short-term borrowings, long-term debt
 maturing within one year and current
 obligations under capital leases....... $  729     $  729       $  729
                                         ------     ------       ------
Long-term debt, excluding portion due
 within one year
  Secured notes.........................  1,087      1,087        1,087
  Deferred purchase certificates........    169        169          169
  Debentures............................  1,591      1,591        1,591
  Convertible debentures................     26         26           26
  Promissory notes......................     34         34           34
  Convertible subordinated
   debentures(a)........................    --         300          600
  Unamortized discount on debt(a).......    (20)       (57)         (95)
                                         ------     ------       ------
                                          2,887      3,150        3,412
Long-term obligations under capital
 leases.................................    730        730          730
                                         ------     ------       ------
    Total long-term debt and capital
     lease obligations..................  3,617      3,880        4,142
                                         ------     ------       ------
Shareholders' equity:
  Series A Preferred Stock, $.01 stated
   value................................    --         --           --
  Series B Preferred Stock, $.01 stated
   value................................    --         --           --
  Class 1 ESOP Preferred Stock, $.01 par
   value................................    --         --           --
  Class 2 ESOP Preferred Stock, $.01 par
   value(b).............................    --         --           --
  Class P, M and S Voting Preferred
   Stock, $.01 par value................    --         --           --
  Class I, Pilot MEC, IAM and SAM
   Preferred Stock, $.01 par value......    --         --           --
  Common Stock, $.01 par value..........    --         --           --
  Additional capital invested(a)........  1,287      1,024          762
  Retained earnings (deficit)........... (1,335)    (1,335)      (1,335)
  Unearned ESOP Preferred Stock.........    (83)       (83)         (83)
  Stock held in treasury................   (161)      (161)        (161)
  Other.................................    (24)       (24)         (24)
                                         ------     ------       ------
    Total shareholders' equity..........   (316)      (579)        (841)
                                         ------     ------       ------
      Total capitalization.............. $4,030     $4,030       $4,030
                                         ======     ======       ======
</TABLE>

- --------
   
(a) Assuming a 50% exchange, the Debentures that will be issued are expected to
    have an aggregate principal amount of $300 million and an aggregate fair
    market value of $263 million as of the date of exchange. Assuming a 100%
    exchange, the Debentures that will be issued are expected to have an
    aggregate principal amount of $600 million and an aggregate fair market
    value of $525 million as of the date of exchange.     
       
       
  The difference between the aggregate principal amount and the aggregate
  fair market value of the Debentures is classified as a debt discount. The
  difference between the fair market value of the Debentures and the carrying
  value of the Preferred Stock is credited to additional capital invested. To
  the extent the actual aggregate fair market value of the Debentures at the
  date of exchange differs from the expected amounts, the balances of the
  unamortized debt discount and additional capital invested will change
  accordingly.
   
(b) To the extent that shares of Class 2 ESOP Preferred Stock are committed to
    be contributed to the Supplemental ESOP (as defined under "Description of
    Capital Stock--The ESOP Preferred Stock") such shares will be reported
    outside of equity because the employees can elect to receive their "book
    entry" shares from the Company in cash upon termination of employment.     
 
                                       16

<PAGE>
 
           SELECTED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION
   
  The following should be read in conjunction with the Company's Consolidated
Financial Statements and the related notes thereto. The financial information
for each of the years in the five-year period ended December 31, 1994 has been
derived from the consolidated financial statements of the Company previously
filed with the Commission which have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports. Reference is
made to said reports for the years 1994, 1993 and 1992 which include an
explanatory paragraph with respect to the changes in methods of accounting for
income taxes and postretirement benefits other than pensions as discussed in
the notes to the consolidated financial statements for such years. See
"Incorporation of Certain Documents by Reference."     
       
       

<TABLE>   
<CAPTION>
                                       YEAR ENDED DECEMBER 31,
                          -----------------------------------------------------
                            1994       1993       1992       1991       1990
                          ---------  ---------  ---------  ---------  ---------
                           (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S>                       <C>        <C>        <C>        <C>        <C>
STATEMENT OF OPERATIONS
 DATA:
Operating revenues(a)...  $  13,950  $  13,325  $  11,853  $  10,706  $  10,296
Earnings (loss) from
 operations.............        521        263       (538)      (494)       (36)
Earnings (loss) before
 extraordinary item and
 cumulative effect of
 accounting changes.....         77        (31)      (417)      (332)        94
Net earnings (loss).....         51        (50)      (957)      (332)        94
Earnings (loss) per
 common share before
 extraordinary item and
 cumulative effect of
 accounting changes.....       0.76      (2.64)    (17.34)    (14.31)      4.33
Net earnings (loss) per
 common share(b)........      (0.61)     (3.40)    (39.75)    (14.31)      4.33
STATEMENT OF FINANCIAL
 POSITION DATA (at end
 of period):
Total assets............     11,764     12,840     12,257      9,876      7,983
Total long-term debt and
 capital lease
 obligations, including
 current portion........      4,077      3,735      3,783      2,531      1,327
Shareholders' equity....       (316)     1,203        706      1,597      1,671
Book value per common
 share(c)...............     (99.94)     24.55      29.11      67.21      76.34
OTHER DATA:
Ratio of earnings to
 fixed charges..........       1.12         (d)        (d)        (d)      1.16
Ratio of earnings to
 fixed charges and
 preferred stock
 dividends..............       1.11         (d)        (d)        (d)      1.16
UNITED OPERATING DATA:
Revenue passengers
 (millions).............         74         70         67         62         58
Average length of a
 passenger trip in
 miles..................      1,459      1,450      1,390      1,327      1,322
Revenue passenger miles
 (millions).............    108,299    101,258     92,690     82,290     76,137
Available seat miles
 (millions).............    152,193    150,728    137,491    124,100    114,995
Passenger load factor...       71.2%      67.2%      67.4%      66.3%      66.2%
Break even passenger
 load factor............       68.2%      65.5%      70.6%      69.7%      66.5%
Revenue per passenger
 mile...................       11.3c      11.6c      11.3c      11.5c      11.8c
Cost per available seat
 mile...................        8.8c       8.5c       8.9c       9.0c       9.0c
Average price per gallon
 of jet fuel............       58.8c      63.6c      66.4c      71.6c      80.4c
</TABLE>
    
- --------
(a) In the first quarter of 1994, United began recording certain air
    transportation price adjustments, which were previously recorded as
    commission expense, as adjustments to revenues. Operating revenues and
    certain operating statistics for periods prior to 1994 have been adjusted
    to conform with the current presentation. See the Company's Current Report
    on Form 8-K dated May 3, 1994 which is incorporated by reference in this
    Prospectus.
   
(b) In connection with the July 1994 recapitalization, each old common share
    was exchanged for one half of a share of Common Stock. As required under
    generally accepted accounting principles for transactions of this type, the
    historical weighted average shares outstanding have not been restated.
    Thus, direct comparisons between 1994 and prior years' per share amounts
    are not meaningful.     
(c) Book value per common share represents total equity, less the aggregate
    liquidation value of preferred stock, divided by actual common shares
    outstanding.
(d) Earnings were insufficient to cover both fixed charges and fixed charges
    and preferred stock dividends by $98 million in 1993, by $748 million in
    1992 and by $599 million in 1991.
 
                                       17

<PAGE>
 
                               THE EXCHANGE OFFER
 
GENERAL
 
  Participation in the Exchange Offer is voluntary and Holders should carefully
consider whether to accept. Neither the Board nor the Company makes any
recommendation to Holders as to whether to tender or refrain from tendering in
the Exchange Offer. Holders of the Series A Preferred Stock are urged to
consult their financial and tax advisors in making their own decisions on what
action to take in light of their own particular circumstances.
   
  Unless the context requires otherwise, the term "Holder" with respect to the
Exchange Offer means (i) any person in whose name any shares of Series A
Preferred Stock are registered on the books of the Company, (ii) any other
person who has obtained a properly completed stock power from the registered
holder, or (iii) any person whose shares of Series A Preferred Stock are held
of record by The Depository Trust Company ("DTC") who desires to deliver such
Series A Preferred Stock by book-entry transfer at DTC.     
 
PURPOSE OF THE EXCHANGE OFFER
 
  The principal purpose of the Exchange Offer is to improve the Company's
after-tax cash flow by replacing the Series A Preferred Stock with the
Debentures. The potential cash flow benefit to the Company arises because
interest payable on the Debentures (whether paid currently or deferred under
the terms of the Debentures) should be deductible by the Company as it accrues
for federal income tax purposes, while dividends payable on the Series A
Preferred Stock are not deductible. The extent of this cash flow benefit,
however, cannot be predicted because it depends upon the number of shares of
Series A Preferred Stock exchanged pursuant to the Exchange Offer, upon the
Company's federal income tax position in any year and the period of time the
Debentures remain outstanding. Neither the Company's ability to defer interest
payments on the Debentures nor the lack of voting rights on the part of holders
of the Debentures is a purpose of the Company in making the Exchange Offer.
 
  Except as described herein, the Company has no present plans or intention to
make acquisitions of or offers for the Series A Preferred Stock. However, if
any shares of Series A Preferred Stock remain outstanding after the expiration
of the Exchange Offer, the Company will continue to monitor the market for the
Series A Preferred Stock and reserves the right, in its sole discretion, to
acquire and to make offers for Series A Preferred Stock subsequent to the
Expiration Date for cash or in exchange for other securities, by optional
redemption or otherwise. The terms of any such acquisitions or offers may
differ from the terms of the Exchange Offer. Such acquisitions or offers, if
any, may depend upon, among other things, the price and availability of such
shares and the Company's tax position.
 
TERMS OF THE EXCHANGE OFFER
 
  Upon the terms and subject to the conditions set forth herein and in the
Letter of Transmittal, the Company will exchange up to $600,000,000 aggregate
principal amount of Debentures for up to all of the outstanding shares of
Series A Preferred Stock. The Debentures are offered in minimum denominations
of $1,000 and integral multiples thereof, and the Series A Preferred Stock has
a liquidation preference of $100 per share. Consequently, the Exchange Offer
will be effected on a basis of $1,000 principal amount of Debentures for every
ten shares of Series A Preferred Stock validly tendered and accepted for
exchange. The Company will pay cash to tendering Holders of Series A Preferred
Stock in lieu of issuing Debentures with a principal amount of less than
$1,000. Upon the terms and subject to the conditions set forth herein and in
the Letter of Transmittal, the Company will accept Series A Preferred Stock
validly tendered and not withdrawn as promptly as practicable after the
Expiration Date unless the Exchange Offer has been withdrawn or terminated. The
Company will not accept Series A Preferred Stock for exchange prior to the
Expiration Date. The Company expressly
 
                                       18

<PAGE>
 
reserves the right, in its sole discretion, to delay acceptance for exchange of
Series A Preferred Stock tendered under the Exchange Offer or the exchange of
the Debentures for the Series A Preferred Stock accepted for exchange (subject
to Rules 13e-4 and 14e-1 under the Exchange Act, which require that the Company
consummate the Exchange Offer or return the Series A Preferred Stock deposited
by or on behalf of the Holders thereof promptly after the termination or
withdrawal of the Exchange Offer), or to withdraw or terminate the Exchange
Offer and not accept any Series A Preferred Stock at any time for any reason.
In all cases, except to the extent waived by the Company, delivery of
Debentures in exchange for the Series A Preferred Stock accepted for exchange
pursuant to the Exchange Offer will be made only after timely receipt by the
Exchange Agent of Series A Preferred Stock (or confirmation of book-entry
transfer thereof), a properly completed and duly executed Letter of Transmittal
and any other documents required thereby.
   
  As of February 28, 1995, there were 5,999,900 shares of Series A Preferred
Stock outstanding. This Prospectus, together with the Letter of Transmittal, is
being sent to all registered Holders as of March 2, 1995.     
 
  The Company shall be deemed to have accepted validly tendered Series A
Preferred Stock (or defectively tendered Series A Preferred Stock with respect
to which the Company has waived such defect) when, as and if the Company has
given oral or written notice thereof to the Exchange Agent. The Exchange Agent
will act as agent for the tendering Holders for the purpose of receiving the
Debentures from the Company and remitting such Debentures to tendering Holders.
Upon the terms and subject to the conditions of the Exchange Offer, delivery of
Debentures in exchange for Series A Preferred Stock will be made as promptly as
practicable after the Expiration Date.
 
  If any tendered Series A Preferred Stock is not accepted for exchange because
of an invalid tender, the occurrence of certain other events set forth herein
or otherwise, unless otherwise requested by the Holder under "Special Delivery
Instructions" in the Letter of Transmittal, such Series A Preferred Stock will
be returned, without expense, to the tendering Holder thereof (or in the case
of Series A Preferred Stock tendered by book-entry transfer into the Exchange
Agent's account at DTC, such Series A Preferred Stock will be credited to an
account maintained at DTC designated by the participant therein who so
delivered such Series A Preferred Stock), as promptly as practicable after the
Expiration Date or the withdrawal or termination of the Exchange Offer.
 
  Holders of Series A Preferred Stock will not have any appraisal or
dissenters' rights under the DGCL in connection with the Exchange Offer. The
Company intends to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder.
 
  Holders who tender Series A Preferred Stock in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of
Series A Preferred Stock pursuant to the Exchange Offer. See "--Fees and
Expenses."
 
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
   
  The Exchange Offer will expire on the Expiration Date. The term "Expiration
Date" shall mean 5:00 p.m., New York City time, on April 3, 1995, unless the
Company, in its sole discretion, extends the Exchange Offer, in which case the
term "Expiration Date" shall mean the latest date and time to which the
Exchange Offer is extended.     
 
  The Company reserves the right to extend the Exchange Offer in its sole
discretion at any time and from time to time by giving oral or written notice
to the Exchange Agent and by timely public announcement communicated, unless
otherwise required by applicable law or regulation, by making a
 
                                       19

<PAGE>
 
release to the Dow Jones News Service. During any extension of the Exchange
Offer, all Series A Preferred Stock previously tendered pursuant to the
Exchange Offer and not withdrawn will remain subject to the Exchange Offer.
   
  The Company expressly reserves the right to (i) amend or modify the terms of
the Exchange Offer in any manner and (ii) withdraw or terminate the Exchange
Offer and not accept for exchange any Series A Preferred Stock, at any time for
any reason, including (without limitation) if fewer than 2,000,000 shares of
Series A Preferred Stock are tendered (which condition may be waived by the
Company). If the Company makes a material change in the terms of the Exchange
Offer or if it waives a material condition of the Exchange Offer, the Company
will extend the Exchange Offer. The minimum period for which the Exchange Offer
will be extended following a material change or waiver, other than a change in
the amount of Series A Preferred Stock sought for exchange, will depend upon
the facts and circumstances, including the relative materiality of the change
or waiver. With respect to a change in the amount of Series A Preferred Stock
sought, the offer will be extended for a minimum of ten business days following
public announcement of such change. Any withdrawal or termination of the
Exchange Offer will be followed as promptly as practicable by public
announcement thereof. In the event the Company withdraws or terminates the
Exchange Offer, it will give immediate notice to the Exchange Agent, and all
Series A Preferred Stock theretofore tendered pursuant to the Exchange Offer
will be returned promptly to the tendering Holders thereof. See "--Withdrawal
of Tenders."     
 
ACCUMULATED DIVIDENDS AND INTEREST ON DEBENTURES
   
  The Debentures will bear interest at an annual rate of 6 3/8% from the first
day following the Expiration Date (the "Issue Date") or from the most recent
interest payment date to which interest has been paid or duly provided for.
Dividends accumulated after January 31, 1995 will not be paid on Series A
Preferred Stock accepted for exchange in the Exchange Offer. In lieu thereof,
holders of Debentures will be entitled to interest at a rate of 6 1/4% per
annum (equal to the stated dividend rate on the Series A Preferred Stock) from
February 1, 1995 through the Expiration Date, payable at the time of the first
interest payment on the Debentures. See "Description of Debentures--Interest."
    
PROCEDURES FOR TENDERING
 
  The tender of Series A Preferred Stock by a Holder thereof pursuant to one of
the procedures set forth below will constitute an agreement between such Holder
and the Company in accordance with the terms and subject to the conditions set
forth herein and in the Letter of Transmittal.
   
  Each Holder of the Series A Preferred Stock wishing to accept the Exchange
Offer must (i) properly complete and sign the Letter of Transmittal or a
facsimile thereof (all references in this Prospectus to the Letter of
Transmittal shall be deemed to include a facsimile thereof) in accordance with
the instructions contained herein and therein, together with any required
signature guarantees, and deliver the same to the Exchange Agent, at either of
its addresses set forth in "--Exchange Agent and Information Agent" and either
(a) certificates for the Series A Preferred Stock must be received by the
Exchange Agent at such address or (b) such Series A Preferred Stock must be
transferred pursuant to the procedures for book-entry transfer described below
and a confirmation of such book-entry transfer must be received by the Exchange
Agent, in each case prior to the Expiration Date or (ii) comply with the
guaranteed delivery procedures described below.     
   
  LETTERS OF TRANSMITTAL, SERIES A PREFERRED STOCK AND ANY OTHER REQUIRED
DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE AGENT, NOT TO THE COMPANY, THE
DEALER MANAGERS OR THE INFORMATION AGENT.     
 
                                       20

<PAGE>
 
   
  Signature Guarantees. If tendered Series A Preferred Stock is registered in
the name of the signer of the Letter of Transmittal and the Debentures to be
issued in exchange therefor are to be issued (and any untendered Series A
Preferred Stock is to be reissued) in the name of the registered Holder (which
term, for the purposes described herein, shall include any participant in DTC
whose name appears on a security listing as the owner of Series A Preferred
Stock), the signature of such signer need not be guaranteed. If the tendered
Series A Preferred Stock is registered in the name of someone other than the
signer of the Letter of Transmittal, such tendered Series A Preferred Stock
must be endorsed or accompanied by written instruments of transfer in form
satisfactory to the Company and duly executed by the registered Holder, and the
signature on the endorsement or instrument of transfer must be guaranteed by a
financial institution (including most banks, savings and loans associations and
brokerage houses) that is a participant in the Security Transfer Agents
Medallion Program or The New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program (any of the foregoing
hereinafter referred to as an "Eligible Institution"). If the Debentures and/or
Series A Preferred Stock not exchanged are to be delivered to an address other
than that of the registered Holder appearing on the register for the Series A
Preferred Stock, the signature in the Letter of Transmittal must be guaranteed
by an Eligible Institution. Any beneficial owner whose Series A Preferred Stock
is registered in the name of a broker, dealer, commercial bank, trust company
or other nominee and who wishes to tender should contact such registered Holder
promptly and instruct such registered Holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on its own behalf,
such owner must, prior to completing and executing a Letter of Transmittal and
delivering its Series A Preferred Stock, either make appropriate arrangements
to register ownership of the Series A Preferred Stock in such owner's name or
obtain a properly completed stock power from the registered Holder. The
transfer of registered ownership may take considerable time and may not be able
to be completed prior to the Expiration Date.     
   
  THE METHOD OF DELIVERY OF SERIES A PREFERRED STOCK AND ALL OTHER DOCUMENTS IS
AT THE ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PRIOR INSURANCE OBTAINED,
AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO
PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.     
 
  Book-Entry Transfer. The Company understands that the Exchange Agent will
make a request promptly after the date of this Prospectus to establish accounts
with respect to the Series A Preferred Stock at DTC for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof, any
financial institution that is a participant in DTC's system may make book-entry
delivery of Series A Preferred Stock by causing DTC to transfer such Series A
Preferred Stock into the Exchange Agent's account with respect to the Series A
Preferred Stock in accordance with DTC's Automated Tender Offer Program
("ATOP") procedures for such book-entry transfers. However, the exchange for
the Series A Preferred Stock so tendered will only be made after timely
confirmation (a "Book-Entry Confirmation") of such Book-Entry Transfer of
Series A Preferred Stock into the Exchange Agent's account, and timely receipt
by the Exchange Agent of an Agent's Message (as such term is defined in the
next sentence) and any other documents required by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility and received by the Exchange Agent and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgement from a participant tendering Series A
Preferred Stock that is the subject of such Book-Entry Confirmation that such
participant has received and agrees to be bound by the terms of the Letter of
Transmittal, and that the Company may enforce such agreement against such
participant.
 
  Guaranteed Delivery. If a Holder desires to accept the Exchange Offer and
time will not permit a Letter of Transmittal or Series A Preferred Stock to
reach the Exchange Agent before the Expiration Date or the procedure for book-
entry transfer cannot be completed on a timely basis, a tender may be
 
                                       21

<PAGE>
 
   
effected if the Exchange Agent has received at its office, prior to the
Expiration Date, a letter, a telegram or facsimile transmission from an
Eligible Institution setting forth the name and address of the tendering
Holder, the name(s) in which the Series A Preferred Stock is registered and, if
the Series A Preferred Stock is held in certificated form, the certificate
number of the Series A Preferred Stock to be tendered, and stating that the
tender is being made thereby and guaranteeing that within five NYSE trading
days after the date of execution of such letter, telegram or facsimile
transmission by the Eligible Institution, the Series A Preferred Stock in
proper form for transfer together with a properly completed and duly executed
Letter of Transmittal (and any other required documents), or a confirmation of
book-entry transfer of such Series A Preferred Stock into the Exchange Agent's
account at DTC, will be delivered by such Eligible Institution. Unless the
Series A Preferred Stock being tendered by the above-described method is
deposited with the Exchange Agent within the time period set forth above
(accompanied or preceded by a properly completed Letter of Transmittal and any
other required documents) or a confirmation of book-entry transfer of such
Series A Preferred Stock into the Exchange Agent's account at DTC in accordance
with DTC's ATOP procedures is received, the Company may, at its option, reject
the tender. Copies of a Notice of Guaranteed Delivery which may be used by
Eligible Institutions for the purposes described in this paragraph are
available from the Exchange Agent and the Information Agent.     
   
  Miscellaneous. All questions as to the validity, form, eligibility (including
time of receipt) and acceptance for exchange of any tender of Series A
Preferred Stock will be determined by the Company, whose determination will be
final and binding. The Company reserves the absolute right to reject any or all
tenders not in proper form or the acceptance for exchange of which may, in the
opinion of the Company's counsel, be unlawful. The Company also reserves the
absolute right to waive any defect or irregularity in the tender of any Series
A Preferred Stock, and the Company's interpretation of the terms and conditions
of the Exchange Offer (including the Instructions in the Letter of Transmittal)
will be final and binding. None of the Company, the Exchange Agent, the Dealer
Managers or the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification.     
 
  Tenders of Series A Preferred Stock involving any irregularities will not be
deemed to have been made until such irregularities have been cured or waived.
Series A Preferred Stock received by the Exchange Agent that is not validly
tendered and as to which the irregularities have not been cured or waived will
be returned by the Exchange Agent to the tendering Holder (or in the case of
Series A Preferred Stock tendered by book-entry transfer into the Exchange
Agent's account at DTC, such Series A Preferred Stock will be credited to an
account maintained at DTC designated by the participant therein who so
delivered such Series A Preferred Stock), unless otherwise requested by the
Holder in the Letter of Transmittal, as promptly as practicable after the
Expiration Date or the withdrawal or termination of the Exchange Offer.
 
LETTER OF TRANSMITTAL
 
  The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
 
  The party tendering Series A Preferred Stock for exchange (the "Transferor")
exchanges, assigns and transfers the Series A Preferred Stock to the Company
and irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Series A Preferred Stock to be
assigned, transferred and exchanged. The Transferor represents and warrants
that it has full power and authority to tender, exchange, assign and transfer
the Series A Preferred Stock and to acquire Debentures issuable upon the
exchange of such tendered Series A Preferred Stock, and that, when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Series A Preferred Stock, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim.
The Transferor also warrants that it will, upon
 
                                       22

<PAGE>
 
request, execute and deliver any additional documents deemed by the Company to
be necessary or desirable to complete the exchange, assignment and transfer of
tendered Series A Preferred Stock or transfer ownership of such Series A
Preferred Stock on the account books maintained by DTC. All authority conferred
by the Transferor will survive the death, bankruptcy or incapacity of the
Transferor and every obligation of the Transferor shall be binding upon the
heirs, legal representatives, successors, assigns, executors and administrators
of such Transferor.
 
WITHDRAWAL OF TENDERS
 
  Tenders of Series A Preferred Stock pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date and, unless accepted for
exchange by the Company, may be withdrawn at any time after 40 business days
after the date of this Prospectus.
 
  To be effective, a written notice of withdrawal delivered by mail, hand
delivery or facsimile transmission must be timely received by the Exchange
Agent at the address set forth in the Letter of Transmittal. The method of
notification is at the risk and election of the Holder. Any such notice of
withdrawal must specify (i) the Holder named in the Letter of Transmittal as
having tendered Series A Preferred Stock to be withdrawn, (ii) if the Series A
Preferred Stock is held in certificated form, the certificate numbers of the
Series A Preferred Stock to be withdrawn, (iii) that such Holder is withdrawing
his election to have such Series A Preferred Stock exchanged, and (iv) the name
of the registered Holder of such Series A Preferred Stock, and must be signed
by the Holder in the same manner as the original signature on the Letter of
Transmittal (including any required signature guarantees) or be accompanied by
evidence satisfactory to the Company that the person withdrawing the tender has
succeeded to the beneficial ownership of the Series A Preferred Stock being
withdrawn. The Exchange Agent will return the properly withdrawn Series A
Preferred Stock promptly following receipt of notice of withdrawal. If Series A
Preferred Stock has been tendered pursuant to the procedure for book-entry
transfer, any notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawn Series A Preferred Stock and
otherwise comply with DTC's procedures. All questions as to the validity of
notice of withdrawal, including time of receipt, will be determined by the
Company, and such determination will be final and binding on all parties.
Withdrawals of tenders of Series A Preferred Stock may not be rescinded and any
Series A Preferred Stock withdrawn will thereafter be deemed not validly
tendered for purposes of the Exchange Offer. Properly withdrawn Series A
Preferred Stock, however, may be retendered by following the procedures
therefor described elsewhere herein at any time prior to the Expiration Date.
See "--Procedures for Tendering."
   
EXCHANGE AGENT AND INFORMATION AGENT     
   
  The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Deliveries to the Exchange Agent should be as follows:     
       
      By Hand or Overnight Courier:                     By Mail:
          The Bank of New York               (registered or certified mail
        Reorganization Section                       recommended) 
          101 Barclay Street                    The Bank of New York
               (7 East)                         Reorganization Section
          New York, NY 10286                      101 Barclay Street
              Attention:                               (7 East)
            Arwen Gibbons                         New York, NY 10286
                                                      Attention:
                                                    Arwen Gibbons      
 
                                 By Facsimile:
                        
                     (For Eligible Institutions Only):     
                                 
                              (212) 571-3080     
                          
                       Confirm Receipt by Telephone:     
                                 
                              (212) 815-6333     
                                   
                                Attention:     
                                  
                               Arwen Gibbons     
 
                                       23

<PAGE>
 
   
  D.F. King & Co., Inc. has been retained as Information Agent. Questions and
requests for assistance regarding the Exchange Offer, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery may be directed to the Information Agent at 77
Water Street, New York, New York 10005, telephone (800) 669-5550 or (212) 269-
5550 (collect).     
   
  The Company will pay the Exchange Agent and Information Agent reasonable and
customary fees for their services and will reimburse them for all their
reasonable out-of-pocket expenses in connection therewith.     
 
DEALER MANAGERS
   
  Goldman, Sachs & Co. and Lehman Brothers Inc., as Dealer Managers, have
agreed to solicit exchanges of Series A Preferred Stock for Debentures. The
Company will pay each Dealer Manager a fee that is dependent on the number of
shares of Series A Preferred Stock accepted pursuant to the Exchange Offer. The
maximum fee payable is approximately $3.75 million. Additional solicitation may
be made by telecopier, by telephone or in person by officers and regular
employees of the Company and its affiliates. No additional compensation will be
paid to any such officers and employees who engage in soliciting tenders.     
 
LISTING AND TRADING OF DEBENTURES AND SERIES A PREFERRED STOCK; TRANSFER
RESTRICTIONS
   
  There has not previously been any public market for the Debentures. While the
Debentures and the Common Stock issuable upon conversion thereof have been
approved for listing on the NYSE, subject to official notice of issuance, there
can be no assurance that an active market for the Debentures will develop or be
sustained in the future on such exchange. Although the Dealer Managers have
indicated to the Company that they intend to make a market in the Debentures as
permitted by applicable laws and regulations, they are not obligated to do so
and may discontinue any such market-making at any time without notice.
Accordingly, no assurance can be given as to the liquidity of, or trading
markets for, the Debentures.     
   
  The Series A Preferred Stock and the Common Stock issuable upon conversion of
such Series A Preferred Stock have not been and will not be registered under
the Securities Act and may not be offered or sold within the United States or
to, or for the account or benefit of, U.S. persons except pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act. Such Series A Preferred Stock and such
Common Stock are subject to restrictions on their transfer designed to ensure
compliance with the requirements of the Securities Act and, upon consummation
of the Exchange Offer, will continue to be subject to such existing
restrictions upon transfer, including the terms of the original issuance of
such Series A Preferred Stock and such Common Stock. Holders of Series A
Preferred Stock who do not tender their Series A Preferred Stock in the
Exchange Offer or whose Series A Preferred Stock is not accepted for exchange
will continue to hold such Series A Preferred Stock and will be entitled to all
the rights and preferences, and will be subject to all of the limitations
applicable thereto. Moreover, to the extent that Series A Preferred Stock is
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Series A Preferred Stock could be adversely affected. Under Rule 144
as in effect on the date hereof, beginning February 12, 1996, the Series A
Preferred Stock and the Common Stock issuable upon conversion thereof which is
not (and has not been) held by an affiliate of the Company will no longer be
subject to these limitations.     
 
TRANSACTIONS AND ARRANGEMENTS CONCERNING THE SERIES A PREFERRED STOCK
 
  Except as described herein, there are no contracts, arrangements,
understandings or relationships in connection with the Exchange Offer between
the Company or any of its directors or executive officers and any person with
respect to any securities of the Company, including the Debentures, the Series
A Preferred Stock and the Common Stock issuable upon conversion thereof.
 
                                       24

<PAGE>
 
FEES AND EXPENSES; TRANSFER TAXES
   
  The expenses of soliciting tenders of the Series A Preferred Stock will be
borne by the Company. For compensation to be paid to the Dealer Managers see
"--Dealer Managers." The total cash expenditures to be incurred by the Company
in connection with the Exchange Offer, other than fees payable to the Dealer
Managers, but including the expenses of the Dealer Managers, printing,
accounting and legal fees, and the fees and expenses of the Exchange Agent, the
Information Agent and the Trustee under the Indenture, are estimated to be
approximately $600,000.     
 
  Holders of the Series A Preferred Stock accepted in the Exchange Offer are
responsible for paying any transfer taxes in connection with such exchange. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering Holder.
 
                           DESCRIPTION OF DEBENTURES
 
GENERAL
   
  The Debenture constitutes a series of debt securities ("Debt Securities") to
be issued under an Indenture (the "Indenture"), to be dated as of April 3,
1995, between the Company and The Bank of New York, as trustee (the "Trustee").
The following statements with respect to the Debentures are summaries and are
subject to the detailed provisions of the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), and the Indenture, a copy of the form of
which has been filed as an exhibit to the Registration Statement. The following
summaries of certain provisions of the Indenture do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all
the provisions of the Debentures and the Indenture, including the definitions
therein of certain terms capitalized and not otherwise defined in this
Prospectus. Wherever references are made to particular provisions of the
Indenture or terms defined therein, such provisions or definitions are
incorporated by reference as part of the statements made and such statements
are qualified in their entirety by such references.     
   
  The Debentures will be unsecured, subordinated obligations of the Company,
will be limited in aggregate principal amount to the aggregate principal amount
of Debentures issued in the Exchange Offer and will mature on February 1, 2025.
The Debentures will be issued only in fully registered form, without coupons,
in minimum denominations of $1,000 and any integral multiples of $1,000 in
excess thereof.     
 
  The Indenture provides that the Debt Securities may be issued without
limitation as to aggregate principal amount, in one or more series, in each
case as established from time to time in or pursuant to authorization granted
by resolution of the Board and an officer's certificate or as established in
one or more indentures supplemental to the Indenture. All Debt Securities of
one series need not be issued at the same time and, unless otherwise provided,
a series may be reopened, without the consent of the holders of the Debt
Securities of such series, for issuances of additional Debt Securities of such
series.
 
  The Indenture does not contain any provisions that would limit the ability of
the Company to incur indebtedness or that would afford holders of the
Debentures protection in the event of a highly leveraged or similar transaction
involving the Company or in the event of a change of control.
 
  Debentures will be transferable or exchangeable at the agency of the Company
maintained for such purpose in The City of New York (which, unless changed,
shall be a corporate trust office or agency of the Trustee). Debentures may be
transferred or exchanged without service charge, other than any tax or
governmental charge imposed in connection therewith. (Section 3.5 of the
Indenture.)
 
                                       25

<PAGE>
 
INTEREST
   
  The Debentures will mature on February 1, 2025 and will bear interest at an
annual rate of 6 3/8% from the Issue Date or from the most recent interest
payment date to which interest has been paid or duly provided for. In addition,
holders of record of the Debentures will be entitled to interest at a rate of 6
1/4% per annum from February 1, 1995 through the Expiration Date, in lieu of
dividends accumulating after January 31, 1995 on their Series A Preferred Stock
accepted for exchange, payable at the time of the first interest payment on the
Debentures. Interest will be payable quarterly in arrears on February 1, May 1,
August 1 and November 1 of each year commencing May 1, 1995, provided that so
long as the Company shall not be in default in the payment of interest on the
Debentures, the Company shall have the right, upon prior notice by public
announcement given in accordance with NYSE rules at any time during the term of
the Debentures, to extend the interest payment period from time to time for a
period not exceeding 20 consecutive calendar quarters (each, an "Extension
Period"). Interest will continue to accrue on the Debentures during an
Extension Period and will compound quarterly, at the rate specified for the
Debentures, to the extent permitted by applicable law. See "--Option to Extend
Interest Payment Period." Interest payable on any Debenture that is punctually
paid or duly provided for on any Interest Payment Date shall be paid to the
person in whose name such Debenture is registered at the close of business on
the January 15, April 15, July 15 or October 15, respectively, preceding such
Interest Payment Date (each, a "Record Date"). Interest will be computed on the
basis of twelve 30-day months and a 360-day year and, for any period shorter
than a full calendar month, on the basis of the actual number of days elapsed
in such period. (Section 3.10 of the Indenture). If any date on which interest
is payable on the Debentures is not a Business Day, the payment of interest due
on such date may be made on the next succeeding Business Day (and without any
interest or other payment in respect of such delay). A "Business Day" shall
mean any day other than a day on which banking institutions in The City of New
York or in Chicago, Illinois are authorized or required by law to close.     
 
  Payments in respect of the Debentures will be made at the office or agency of
the Company maintained for that purpose in The City of New York (which, unless
changed, shall be a corporate trust office or agency of the Trustee). However,
at the option of the Company, payments on the Debentures may be made (i) by
checks mailed by the Trustee to the Holders entitled thereto at their
registered addresses or (ii) by wire transfers to accounts maintained by the
Holders entitled thereto as specified in the Register, provided that, in either
case, the payment of principal with respect to any Debenture will be made only
upon surrender of such Debenture to the Trustee. Interest payable on any
Debenture that is not punctually paid or duly provided for on any Interest
Payment Date will forthwith cease to be payable to the person in whose name
such Debenture is registered on the relevant Record Date, and such defaulted
interest will instead be payable to the person in whose name such Debenture is
registered on the special record date or other specified date determined in
accordance with the Indenture; provided, however, that interest shall not be
considered payable by the Company on any Interest Payment Date falling within
an Extension Period unless the Company has elected to make a full or partial
payment of interest accrued on the Debentures on such Interest Payment Date.
(Section 3.7 of the Indenture.)
 
  In the event the Company fails at any time to make any payment of interest,
principal or premium on the Debentures when due (after giving effect to any
grace period for payment thereof as described in "--Events of Default, Notice
and Certain Rights on Default") or the Company exercises its option to extend
the interest payment period for an Extension Period as described in "--Option
to Extend Interest Payment Period," the Company will not, until all defaulted
interest on the Debentures and all interest accrued on the Debentures during an
Extension Period and all principal and premium, if any, then due and payable on
the Debentures shall have been paid in full, (i) declare, set aside or pay any
dividend or distribution on any capital stock of the Company, including the
Series A Preferred Stock and the Common Stock, except for dividends or
distributions in shares of its capital stock or in rights to acquire shares of
its capital stock, or (ii) repurchase, redeem or otherwise acquire, or make any
sinking fund
 
                                       26

<PAGE>
 
   
payment for the purchase or redemption of, any shares of its capital stock
(except by conversion into or exchange for shares of its capital stock and
except for a redemption, purchase or other acquisition of shares of its capital
stock made for the purpose of an employee incentive plan or benefit plan of the
Company or any of its subsidiaries); provided, however, that any moneys
deposited in any sinking fund with respect to any preferred stock of the
Company in compliance with the provisions of such sinking fund and not in
violation of this provision may thereafter be applied to the purchase or
redemption of such preferred stock in accordance with the terms of such sinking
fund without regard to the restrictions contained in this provision. (Section
9.8 of the Indenture.)     
 
OPTION TO EXTEND INTEREST PAYMENT PERIOD
 
  So long as the Company shall not be in default in the payment of interest on
the Debentures, the Company shall have the right, upon prior notice by public
announcement given in accordance with NYSE rules at any time during the term of
the Debentures, prior to an Interest Payment Date as provided below, to extend
the interest payment period from time to time to another Interest Payment Date
by one or more quarterly periods, not to exceed 20 consecutive calendar
quarters from the last Interest Payment Date to which interest was paid in full
(each, an "Extension Period"). No interest shall be due and payable during an
Extension Period, but on the Interest Payment Date occurring at the end of each
Extension Period the Company shall pay to the holders of record on the Record
Date for such Interest Payment Date (regardless of who the holders of record
may have been on other dates during the Extension Period) all accrued and
unpaid interest on the Debentures, together with interest thereon. Interest
will continue to accrue on the Debentures during an Extension Period and will
compound quarterly, at the rate specified for the Debentures, to the extent
permitted by applicable law. Prior to the termination of any Extension Period,
the Company may pay all or any portion of the interest accrued on the
Debentures on any Interest Payment Date to holders of record on the Record Date
for such Interest Payment Date or from time to time further extend the interest
payment period, provided that any such Extension Period together with all such
previous and further extensions thereof may not exceed 20 calendar quarters. If
the Company shall elect to pay all of the interest accrued on the Debentures on
an Interest Payment Date during an Extension Period, such Extension Period
shall automatically terminate on such Interest Payment Date. Upon the
termination of any Extension Period and the payment of all amounts of interest
then due, the Company may commence a new Extension Period, subject to the above
requirements. Consequently, there could be multiple Extension Periods of
varying lengths throughout the term of the Debentures. The Company has no
current intention of exercising its right to defer any interest payment period.
However, in the event the Company determines to extend an interest payment
period, or in the event the Company thereafter extends an Extension Period or
prepays interest accrued during an Extension Period as described above, the
market price of the Debentures is likely to be affected. In addition, as a
result of such rights, the market price of the Debentures may be more volatile
than other debt instruments with original issue discount that do not have such
rights. A holder that disposes of its Debentures during an Extension Period,
therefore, may not receive the same return on its investment as a holder that
continues to hold its Debentures.
   
  The Company shall cause the Trustee to give holders of the Debentures prior
notice, by public announcement given in accordance with NYSE rules and by mail
to all such holders, of (i) the Company's election to initiate an Extension
Period and the duration thereof, (ii) the Company's election to extend any
Extension Period beyond the Interest Payment Date on which such Extension
Period is then scheduled to terminate and the duration of such extension and
(iii) the Company's election to make a full or partial payment of interest
accrued on the Debentures on any Interest Payment Date during any Extension
Period and the amount of such payment. In no event shall such notice be given
less than five Business Days prior to the January 15, April 15, July 15 or
October 15 next preceding the applicable Interest Payment Date.     
 
                                       27

<PAGE>
 
SUBORDINATION
 
  The payment of the principal of, and premium, if any, and interest on the
Debentures will be subordinated to the extent set forth in the Indenture to the
prior payment in full of amounts then due on all Senior Indebtedness (as
defined below). No payments or distributions, whether in cash, securities or
other property (other than securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment the payment of which
is subordinated, at least to the same extent as the Debentures, to the payment
of all Senior Indebtedness at the time outstanding and to any securities issued
in respect thereof under any such plan of reorganization or readjustment) on
account of principal of, and premium, if any, or interest on the Debentures may
be made by the Company unless full payment of all amounts then due on Senior
Indebtedness has been made or provided for in money or money's worth. Upon any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities (other than securities of the Company
or any other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinated, at least to the same extent
as the Debentures, to the payment of all Senior Indebtedness at the time
outstanding and to any securities issued in respect thereof under such plan of
reorganization or readjustment) to creditors upon any dissolution or winding up
or total or partial liquidation or reorganization of the Company, whether
voluntary or involuntary or in bankruptcy, insolvency, receivership or other
proceedings, all amounts due upon all Senior Indebtedness shall first be paid
in full, or payment thereof provided for in money or money's worth, before the
holders of the Debentures or the Trustee shall be entitled to retain any assets
so paid or distributed (other than the securities described in the first
parenthetical of this sentence) in respect of the Debentures (for principal or
interest) or of the Indenture. (Article 12 of the Indenture.)
 
  The term "Senior Indebtedness" of the Company means all Indebtedness of the
Company (other than the Debentures), unless such Indebtedness by its terms or
the terms of the instrument creating or evidencing the same expressly provides
that it is subordinate in right of payment to or pari passu with the
Debentures. (Section 1.1 of the Indenture.) "Indebtedness," when used with
respect to the Company, means, without duplication, the principal of, and
premium, if any, and accrued and unpaid interest (including post-petition
interest) on any obligation, whether outstanding on the date hereof or
thereafter created, incurred or assumed, which is (i) indebtedness of the
Company for money borrowed, (ii) Indebtedness Guarantees (as defined in the
Indenture) by the Company of indebtedness for money borrowed by any other
person, (iii) indebtedness evidenced by notes, debentures, bonds or other
instruments of indebtedness for payment of which the Company is responsible or
liable, (iv) obligations for the reimbursement of any obligor on any letter of
credit, bankers' acceptance or similar credit transaction, (v) obligations of
the Company under Capital Leases (as defined in the Indenture) and Flight
Equipment (as defined in the Indenture) leases (the amount of the Company's
obligation under such Flight Equipment leases to be computed in accordance with
Statement of Financial Accounting Standards No. 13 as if such Flight Equipment
leases were Capital Leases), (vi) obligations (net of counterparty payments)
under interest rate and currency swaps, caps, collars, options, forward or spot
contracts or similar arrangements or with respect to foreign currency hedges,
and (vii) commitment and other bank financing fees under contractual
obligations associated with bank debt; provided, however, that Indebtedness
shall not include amounts owed to trade creditors in the ordinary course of
business.
 
  By reason of the subordination described herein, in the event of the
distribution of assets upon insolvency, creditors of the Company who are not
holders of Senior Indebtedness or of the Debentures may recover less, ratably,
than holders of Senior Indebtedness, and may recover more, ratably, than
holders of the Debentures. Moreover, upon any distribution of the assets of the
Company, the holders of the Debentures are required to pay over their share of
such distribution to the holders of Senior Indebtedness to the extent necessary
to pay all holders of Senior Indebtedness in full.
 
  On December 31, 1994 approximately $732 million of Senior Indebtedness was
outstanding. The calculation of the amount of Senior Indebtedness assumes that
the Company is primarily obligated for
 
                                       28

<PAGE>
 
   
the present value of future minimum lease payments under operating leases
guaranteed by the Company but does not include other contingent obligations
such as stipulated loss values or liquidated damages which may be payable under
such operating leases. There is no restriction under the Indenture on the
creation of additional indebtedness, including Senior Indebtedness, by the
Company, including indebtedness owed by the Company to United and its other
subsidiaries.     
 
  Because the Company is a holding company that conducts business through its
subsidiaries, the Debentures are effectively subordinated to all existing and
future obligations of the Company's subsidiaries, including United. Any right
of the Company to participate in any distribution of the assets of any of the
Company's subsidiaries, including United, upon the liquidation, reorganization
or insolvency of such subsidiary (and the consequent right of the holders of
the Debentures to participate in those assets) will be subject to the claims of
the creditors (including trade creditors) and preferred stockholders of such
subsidiary, except to the extent that claims of the Company itself as a
creditor of such subsidiary may be recognized, in which case the claims of the
Company would still be subordinate to any security interest in the assets of
such subsidiary and any indebtedness of such subsidiary senior to that held by
the Company. On December 31, 1994, approximately $13.7 billion of indebtedness,
leases and other obligations (including trade payables) of the Company's
subsidiaries (net of those obligations of the Company to its subsidiaries that
are included in the definition of Senior Indebtedness) not included in the
definition of Senior Indebtedness was outstanding.
 
  Because the Company is a holding company, the Company's cash flow and
consequent ability to meet its debt obligations are primarily dependent upon
the earnings of its subsidiaries, particularly United, and on dividends and
other payments therefrom. The Company's subsidiaries are not obligated or
required to pay any amounts due pursuant to the Debentures or to make funds
available therefor in the form of dividends or advances to the Company.
 
CONVERSION
   
  Each Debenture will be convertible at the option of the holder thereof at any
time after the date of original issuance thereof, unless previously redeemed,
into $541.90 for each $1,000 principal amount thereof and the number of fully
paid and nonassessable shares of Common Stock obtained by dividing the
aggregate Principal Amount of such Debenture minus $541.90 for each $1,000
principal amount thereof by the Conversion Price and surrendering such
Debentures to be converted as provided below; provided, however, that the right
to convert Debentures called for redemption shall terminate at the close of
business on the day preceding the Redemption Date, unless the Company shall
default in making payment of the cash payable upon such redemption.
Certificates will be issued for the remaining Debentures in any case in which
fewer than all of the Debentures represented by a certificate are converted.
    
  Holders of Debentures at the close of business on an interest payment record
date shall be entitled to receive the interest payable on such Debentures on
the corresponding Interest Payment Date notwithstanding the conversion thereof
following such interest payment record date and prior to such Interest Payment
Date. However, Debentures surrendered for conversion during the period between
the close of business on any interest payment record date and the opening of
business on the corresponding Interest Payment Date (except Debentures
converted after the issuance of a notice of redemption with respect to a
Redemption Date during such period, which shall be entitled to such interest on
the Interest Payment Date) must be accompanied by payment of an amount equal to
the interest payable on such Debentures on such Interest Payment Date. A holder
of Debentures on an interest payment record date who (or whose transferee)
tenders any such Debentures for conversion into shares of Common Stock on such
Interest Payment Date will receive the interest payable by the Company on such
Debentures on such date, and the converting holder need not include payment of
the amount of such interest upon surrender of Debentures for conversion. Except
as provided above, the Company shall make no payment or allowance for unpaid
interest, whether or not in arrears, on converted Debentures or for dividends
on the shares of Common Stock issued upon such conversion.
 
                                       29

<PAGE>
 
  Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date on which the Debentures shall have been
surrendered and such notice (and if applicable, payment of an amount equal to
the interest payable on such Debentures) received by the Company as aforesaid,
and the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder or holders of record of the shares
represented thereby at such time on such date and such conversion shall be at
the Conversion Price in effect at such time on such date, unless the stock
transfer books of the Company shall be closed on that date, in which event such
person or persons shall be deemed to have become such holder or holders of
record at the close of business on the next succeeding day on which such stock
transfer books are open, but such conversion shall be at the Conversion Price
in effect on the date upon which such shares shall have been surrendered and
such notice received by the Company.
 
  No fractional shares or scrip representing fractions of shares of Common
Stock will be issued upon conversion of the Debentures. Instead of any
fractional interest in a share of Common Stock that would otherwise be
deliverable upon the conversion of a Debenture, the Company shall pay to the
holder of such share an amount in cash based upon the Current Market Price of
Common Stock on the Trading Day immediately preceding the date of conversion.
If more than one Debenture shall be surrendered for conversion at one time by
the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate principal
amount of the Debentures so surrendered.
 
  The Conversion Price shall be adjusted from time to time as follows:
 
    (a) If the Company shall after the Issue Date (A) pay a dividend or make
  a distribution on its capital stock in shares of its Common Stock, (B)
  subdivide its outstanding Common Stock into a greater number of shares, (C)
  combine its outstanding Common Stock into a smaller number of shares or (D)
  issue any shares of capital stock by reclassification of its Common Stock,
  the Conversion Price in effect at the opening of business on the day next
  following the date fixed for the determination of stockholders entitled to
  receive such dividend or distribution or at the opening of business on the
  day next following the day on which such subdivision, combination or
  reclassification becomes effective, as the case may be, shall be adjusted
  so that the holder of any Debentures thereafter surrendered for conversion
  shall be entitled to receive the number of shares of Common Stock that such
  holder would have owned or have been entitled to receive after the
  happening of any of the events described above had such Debenture been
  converted immediately prior to the record date in the case of a dividend or
  distribution or the effective date in the case of a subdivision,
  combination or reclassification. An adjustment made pursuant to this
  paragraph (a) shall become effective immediately after the opening of
  business on the day next following the record date (except as provided
  below) in the case of a dividend or distribution and shall become effective
  immediately after the opening of business on the day next following the
  effective date in the case of a subdivision, combination or
  reclassification.
 
    (b) If the Company shall issue after the Issue Date rights or warrants
  (in each case, other than the Rights) to all holders of Common Stock
  entitling them (for a period expiring within 45 days after the record date
  mentioned below) to subscribe for or purchase Common Stock at a price per
  share less than the Fair Market Value per share of Common Stock on the
  record date for the determination of stockholders entitled to receive such
  rights or warrants, then the Conversion Price in effect at the opening of
  business on the day next following such record date shall be adjusted to
  equal the price determined by multiplying (1) the Conversion Price in
  effect immediately prior to the opening of business on the day next
  following the date fixed for such determination by (2) a fraction, the
  numerator of which shall be the sum of (A) the number of shares of Common
  Stock outstanding on the close of business on the date fixed for such
  determination and (B) the number of shares that the aggregate proceeds to
  the Company from the exercise of such rights or warrants for
 
                                       30

<PAGE>
 
  Common Stock would purchase at such Fair Market Value, and the denominator
  of which shall be the sum of (A) the number of shares of Common Stock
  outstanding on the close of business on the date fixed for such
  determination and (B) the number of additional shares of Common Stock
  offered for subscription or purchase pursuant to such rights or warrants.
  Such adjustment shall become effective immediately after the opening of
  business on the day next following such record date (except as provided
  below). In determining whether any rights or warrants entitle the holders
  of Common Stock to subscribe for or purchase shares of Common Stock at less
  than such Fair Market Value, there shall be taken into account any
  consideration received by the Company upon issuance and upon exercise of
  such rights or warrants, the value of such consideration, if other than
  cash, to be determined by the Board.
     
    (c) If the Company shall distribute to all holders of its Common Stock
  any shares of capital stock of the Company (other than Common Stock) or
  evidence of its indebtedness or assets (excluding cash dividends or
  distributions paid from profits or surplus of the Company) or rights or
  warrants (in each case, other than the Rights) to subscribe for or purchase
  any of its securities (excluding those rights and warrants issued to all
  holders of Common Stock entitling them for a period expiring within 45 days
  after the record date referred to in paragraph (b) above to subscribe for
  or purchase Common Stock, which rights and warrants are referred to in and
  treated under paragraph (b) above (any of the foregoing being hereinafter
  in this paragraph (c) called the "Securities")), then in each such case the
  Conversion Price shall be adjusted so that it shall equal the price
  determined by multiplying (1) the Conversion Price in effect immediately
  prior to the close of business on the date fixed for the determination of
  stockholders entitled to receive such distribution by (2) a fraction, the
  numerator of which shall be the Fair Market Value per share of the Common
  Stock on the record date mentioned below less the then fair market value
  (as determined by the Board, whose determination shall be conclusive) of
  the portion of the capital stock or assets or evidences of indebtedness so
  distributed or of such rights or warrants applicable to one share of Common
  Stock, and the denominator of which shall be the Fair Market Value per
  share of the Common Stock on the record date mentioned below. Such
  adjustment shall become effective immediately at the opening of business on
  the Business Day next following (except as provided below) the record date
  for the determination of stockholders entitled to receive such
  distribution. For the purposes of this paragraph (c), the distribution of a
  Security, which is distributed not only to the holders of the Common Stock
  on the date fixed for the determination of stockholders entitled to receive
  such distribution of such security, but also is distributed with each share
  of Common Stock delivered to a person converting a Debenture after such
  determination date, shall not require an adjustment of the Conversion Price
  pursuant to this paragraph (c); provided that on the date, if any, on which
  a Person converting a Debenture would no longer be entitled to receive such
  Security with a share of Common Stock (other than as a result of the
  termination of all such Securities), a distribution of such Securities
  shall be deemed to have occurred and the Conversion Price shall be adjusted
  as provided in this paragraph (c) (and such day shall be deemed to be "the
  date fixed for the determination of the stockholders entitled to receive
  such distribution" and "the record date" within the meaning of the two
  preceding sentences).     
 
    (d) No adjustment in the Conversion Price shall be required unless such
  adjustment would require a cumulative increase or decrease of at least 1%
  in such price; provided, however, that any adjustments that by reason of
  this paragraph (d) are not required to be made shall be carried forward and
  taken into account in any subsequent adjustment until made; and provided,
  further, that any adjustment shall be required and made in accordance with
  these conversion provisions (other than this paragraph (d)) not later than
  such time as may be required in order to preserve the tax-free nature of a
  distribution to the holders of shares of Common Stock. Notwithstanding any
  other provisions, the Company shall not be required to make any adjustment
  of the Conversion Price for the issuance of any shares of Common Stock
  pursuant to any plan providing for the reinvestment of dividends on
  securities of the Company. All calculations shall be made to the nearest
  cent (with $.005 being rounded upward) or to the nearest 1/10 of a share
  (with .05 of a
 
                                      31

<PAGE>
 
  share being rounded upward), as the case may be. Anything to the contrary
  notwithstanding, the Company shall be entitled, to the extent permitted by
  law, to make such reductions in the Conversion Price, in addition to those
  required by this conversion provision, as it in its discretion shall
  determine to be advisable in order that any stock dividends, subdivision of
  shares, reclassification or combination of shares, distribution of rights
  or warrants to purchase stock or securities, or a distribution of other
  assets (other than cash dividends) hereafter made by the Company to its
  stockholders shall not be taxable.
 
  If the Corporation shall be a party to any transaction (including without
limitation a merger, consolidation, sale of all or substantially all of the
Company's assets or recapitalization of the Common Stock and excluding any
transaction as to which paragraph (a) above applies) (each of the foregoing
being referred to herein as a "Transaction"), in each case as a result of which
shares of Common Stock shall be converted into the right to receive stock,
securities or other property (including cash or any combination thereof), each
Debenture which is not converted into the right to receive stock, securities or
other property in connection with such Transaction shall thereafter be
convertible into the kind and amount of shares of stock, securities and other
property (including cash or any combination thereof) receivable upon the
consummation of such Transaction by a holder of that number of shares or
fraction thereof of Common Stock into which $1,000 principal amount of
Debenture was convertible immediately prior to such Transaction, assuming such
holder of Common Stock (i) is not a Person with which the Company consolidated
or into which the Company merged or which merged into the Company or to which
such sale or transfer was made, as the case may be ("Constituent Person"), or
an affiliate of a Constituent Person and (ii) failed to exercise his rights of
election, if any, as to the kind or amount of stock, securities and other
property (including cash) receivable upon such Transaction (provided that if
the kind or amount of stock, securities and other property (including cash)
receivable upon such Transaction is not the same for each share of Common Stock
of the Company held immediately prior to such Transaction by other than a
Constituent Person or an affiliate thereof and in respect of which such rights
of election shall not have been exercised ("non-electing share"), then for the
purpose of this paragraph the kind and amount of stock, securities and other
property (including cash) receivable upon such Transaction by each non-electing
share shall be deemed to be the kind and amount so receivable per share by the
plurality of the non-electing shares). The Company shall not be a party to any
Transaction unless the terms of such Transaction are consistent with the
provisions herein and it shall not consent or agree to the occurrence of any
Transaction until the Company has entered into an agreement with the successor
or purchasing entity, as the case may be, for the benefit of the holders of the
Debentures that will contain provisions enabling the holders of the Debentures
that remain outstanding after such Transaction to convert into the
consideration received by holders of Common Stock at the Conversion Price in
effect immediately prior to such Transaction. The provisions of this paragraph
shall similarly apply to successive Transactions.
 
    If:
 
      (i) the Company shall declare a dividend (or any other distribution)
    on the Common Stock (other than in cash out of profits or surplus and
    other than the Rights); or
       
      (ii) the Company shall authorize the granting to the holders of the
    Common Stock of rights or warrants (other than the Rights) to subscribe
    for or purchase any shares of any class or any other rights or warrants
    (other than the Rights); or     
 
      (iii) there shall be any reclassification of the Common Stock (other
    than an event to which paragraph (a) above with respect to Conversion
    Price adjustment applies) or any consolidation or merger to which the
    Company is a party and for which approval of any stockholders of the
    Company is required, or the sale or transfer of all or substantially
    all of the assets of the Company as an entirety; or
       
      (iv) there shall occur the voluntary or involuntary liquidation,
    dissolution or winding up of the Company;     
 
then the Company shall cause to be filed with the Trustee and shall cause to be
mailed to the holders of the Debentures at their addresses as shown on the
register of the Company, as promptly as possible,
 
                                       32

<PAGE>
 
   
but a least 15 days prior to the applicable date hereinafter specified, a
notice stating (A) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be
entitled to receive such dividend, distribution or rights or warrants are to be
determined or (B) the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution or winding up is expected to
become effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up. Failure to give or receive such notice or any defect
therein shall not affect the legality or validity of such proceedings.     
   
  Whenever the Conversion Price is adjusted as herein provided, the Company
shall promptly file with the Trustee an officer's certificate setting forth the
Conversion Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment which certificate shall be prima facie
evidence of the correctness of such adjustment. Promptly after delivery of such
certificate, the Company shall prepare a notice of such adjustment of the
Conversion Price setting forth the adjusted Conversion Price and the effective
date of such adjustment and shall mail such notice of such adjustment of the
Conversion Price to the holders of the Debentures at such holders' last address
as shown on the register of the Company.     
 
  In any case in which an adjustment shall become effective on the day next
following a record date for an event, the Company may defer until the
occurrence of such event (A) issuing to the holder of any Debenture converted
after such record date and before the occurrence of such event the additional
shares of Common Stock issuable upon such conversion by reason of the
adjustment required by such event over and above the Common Stock issuable upon
such conversion before giving effect to such adjustment and (B) paying to such
holder any amount in cash in lieu of any fraction.
 
  For purposes of these conversion provisions, the number of shares of Common
Stock at any time outstanding shall not include any shares of Common Stock then
owned or held by or for the account of the Company. The Company shall not pay a
dividend or make any distribution on shares of Common Stock held in the
treasury of the Company.
 
  There shall be no adjustment of the Conversion Price in case of the issuance
of any stock of the Company in a reorganization, acquisition or other similar
transaction except as specifically set forth herein. If any action or
transaction would require adjustment of the Conversion Price pursuant to more
than one paragraph hereof, only one adjustment shall be made and such
adjustment shall be the amount of adjustment that has the highest absolute
value.
 
  If the Company shall take any action affecting the Common Stock, other than
action described herein, that in the opinion of the Board would materially
adversely affect the conversion rights of the holders of the Debentures, the
Conversion Price for the Debentures may be adjusted, to the extent permitted by
law, in such manner, if any, and at such time, as the Board may determine to be
equitable in the circumstances.
 
  The Company will at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued shares
of Common Stock or its issued shares of Common Stock held in its treasury, or
both, for the purpose of effecting conversion of the Debentures, the full
number of shares of Common Stock deliverable upon the conversion of all
outstanding Debentures not theretofore converted. For purposes of this
paragraph, the number of shares of Common Stock that shall be deliverable upon
the conversion of all outstanding Debentures shall be computed as if at the
time of computation all such outstanding Debentures were held by a single
holder.
 
  The Company agrees that any shares of Common Stock issued upon conversion of
the Debentures shall be validly issued, fully paid and non-assessable. Before
taking any action that would cause an
 
                                       33

<PAGE>
 
adjustment reducing the Conversion Price below the then-par value of the shares
of Common Stock deliverable upon conversion of the Debentures, the Company will
take any corporate action that, in the opinion of its counsel, may be necessary
in order that the Company may validly and legally issue fully-paid and
nonassessable shares of Common Stock at such adjusted Conversion Price.
 
  The Company shall endeavor to list the shares of Common Stock required to be
delivered upon conversion of the Debentures, prior to such delivery, upon each
national securities exchange, if any, upon which the outstanding Common Stock
is listed at the time of such delivery.
 
  Prior to the delivery of any securities that the Company shall be obligated
to deliver upon conversion of the Debentures, the Company shall endeavor to
comply with all federal and state laws and regulations thereunder requiring the
registration of such securities with, or any approval of or consent to the
delivery thereof by, any governmental authority.
 
  The Company will pay any and all documentary stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of shares of Common
Stock or other securities or property on conversion of the Debentures pursuant
to these conversion provisions; provided, however, that the Company shall not
be required to pay any tax that may be payable in respect of any transfer
involved in the issue or delivery of shares of Common Stock or other securities
or property in a name other than that of the holder of the Debentures to be
converted and no such issue or delivery shall be made unless and until the
person requesting any issue or delivery has paid to the Company the amount of
any such tax or established, to the reasonable satisfaction of the Company,
that such tax has been paid.
 
  The term "Conversion Price" means the conversion price per share of Common
Stock for which the Debentures are convertible, as such Conversion Price may be
adjusted. The initial Conversion Price will be $143.50.
 
  The term "Current Market Price" of publicly traded shares of Common Stock or
any other class of capital stock or other security of the Company or any other
issuer for any day shall mean the last reported sales price, regular way on
such day, or, if no sale takes place on such day, the average of the reported
closing bid and asked prices on such day, regular way, in either case as
reported on the NYSE Composite Tape, or, if such security is not listed or
admitted for trading on the NYSE, on the principal national securities exchange
on which such security is listed or admitted for trading or, if not listed or
admitted for trading on any national securities exchange, on the Nasdaq
National Market ("NNM") of the National Association of Securities Dealers, Inc.
Automated Quotations System ("Nasdaq") or, if such security is not quoted on
such NNM, the average of the closing bid and asked prices on such day in the
over-the-counter market as reported by Nasdaq or, if bid and asked prices for
such security on such day shall not have been reported through Nasdaq, the
average of the bid and asked prices on such day as furnished by any NYSE member
firm regularly making a market in such security selected for such purpose by
the Board.
 
  The term "Fair Market Value" means the average of the daily Current Market
Prices of a share of Common Stock during the five (5) consecutive Trading Days
selected by the Company commencing not more than 20 Trading Days before, and
ending not later than, the earlier of the day in question and the day before
the "ex" date with respect to the issuance or distribution requiring such
computation. The term "ex date," when used with respect to any issuance or
distribution, means the first day on which the Common Stock trades regular way,
without the right to receive such issuance or distribution, on the exchange or
in the market, as the case may be, used to determine that day's Current Market
Price.
 
  The term "Principal Amount" shall mean the principal amount of the Debenture.
 
  The term "Rights" is defined under "Description of Capital Stock--Preferred
Share Purchase Rights."
 
                                       34

<PAGE>
 
  The term "Trading Day" means any day on which the securities in question are
traded on the NYSE, or if such securities are not listed or admitted for
trading on the NYSE, on the principal national securities exchange on which
such securities are listed or admitted, or if not listed or admitted for
trading on any national securities exchange, on the NNM, or if such securities
are not quoted on such NNM, in the applicable securities market in which the
securities are traded.
 
REDEMPTION
 
  The Debentures will not be subject to any mandatory redemption, sinking fund
or other obligation of the Company to amortize, redeem or retire the
Debentures, and will not be redeemable prior to May 1, 1996. On and after such
date, the Company has the option to redeem the Debentures in whole or in part,
at the following percentages of the principal amount thereof redeemed, plus
accrued and unpaid interest, if any, up to but excluding the redemption date,
if redeemed during the twelve-month period commencing May 1 of the years
indicated:
 

<TABLE>
<CAPTION>
                      REDEMPTION
YEAR                    PRICE
- ----                  ----------
<S>                   <C>
1996.................  104.375%
1997.................  103.750%
1998.................  103.125%
1999.................  102.500%
</TABLE>


<TABLE>
<CAPTION>
                      REDEMPTION
YEAR                    PRICE
- ----                  ----------
<S>                   <C>
2000.................  101.875%
2001.................  101.250%
2002.................  100.625%
2003 and thereafter..  100.000%
</TABLE>

   
If fewer than all the outstanding Debentures are to be redeemed, the Trustee,
not more than 45 days prior to the Redemption Date, will select those
Debentures to be redeemed in such manner as the Trustee shall deem fair and
appropriate. (Section 10.3 of the Indenture.)     
 
  The Company may exercise this redemption option only if for 20 trading days
within any period of 30 consecutive trading days, including the last trading
day, the last sale price of the Common Stock as reported by the NYSE Composite
Transaction Tape exceeds 120% of the Conversion Price, subject to adjustment as
described herein. To exercise the option, the Company must, within 10 trading
days after the 30 day period in which the condition in the preceding sentence
has been met, mail a notice of redemption at least 30 days but not more than 60
days before the redemption date to each holder of record of Debentures to be
redeemed at the address shown on the register of the Company. (Section 10.4 of
the Indenture). After the redemption date, interest will cease to accrue on the
Debentures called for redemption and all rights of the holders of such
Debentures will terminate, except the right to receive the redemption price
without interest.
 
VOTING RIGHTS
 
  The holders of the Debentures will have no voting rights.
 
CONSOLIDATION, MERGER OR SALE BY THE COMPANY
 
  The Indenture provides that the Company may merge or consolidate with or into
any other corporation or sell, convey, transfer or otherwise dispose of all or
substantially all of its assets to any person, firm or corporation, if (i) (a)
in the case of a merger or consolidation, the Company is the surviving
corporation or (b) in the case of a merger or consolidation where the Company
is not the surviving corporation and in the case of a sale, conveyance,
transfer or other disposition, the successor corporation is a corporation
organized and existing under the laws of the United States of America or a
State thereof and such corporation expressly assumes by supplemental indenture
all the obligations of the Company under the Debentures and under the
Indenture, (ii) immediately after giving effect to such merger or
consolidation, or such sale, conveyance, transfer or other disposition, no
Default or Event of Default (as defined below) shall have occurred and be
continuing and (iii) certain other conditions are
 
                                       35

<PAGE>
 
   
met. In the event a successor corporation assumes the obligations of the
Company, such successor corporation shall succeed to and be substituted for the
Company under the Indenture and under the Debentures and all obligations of the
Company thereunder shall terminate. (Article 7 of the Indenture.)     
 
EVENTS OF DEFAULT, NOTICE AND CERTAIN RIGHTS ON DEFAULT
 
  The Indenture provides that, if an Event of Default specified therein shall
have occurred and be continuing, either the Trustee or the holders of 25% in
aggregate principal amount of the Debentures then outstanding may, by written
notice to the Company (and to the Trustee, if notice is given by such holders
of Debentures), declare the principal of all the Debentures to be due and
payable. However, at any time after a declaration of acceleration with respect
to the Debentures has been made, but before a judgment or decree based on such
acceleration has been obtained, the holders of a majority in aggregate
principal amount of the Debentures then outstanding may, under certain
circumstances, rescind and annul such acceleration. (Section 5.2 of the
Indenture.)
   
  Events of Default are defined in the Indenture as being: default for thirty
days in payment of any interest installment when due; default for ten days in
payment of principal or premium, if any, at maturity or on redemption or
otherwise, on the Debentures when due; default for sixty days after notice to
the Company by the Trustee, or to the Company and the Trustee by the holders of
at least 25% in aggregate principal amount of the Debentures then outstanding,
in the performance of any other covenant or warranty in the Indenture; and
certain events of bankruptcy, insolvency or reorganization of the Company.
(Section 5.1 of the Indenture.) In addition, pursuant to the officer's
certificate establishing the terms of the Debentures, an Event of Default
occurs if there is a default during an Extension Period resulting in
acceleration of other indebtedness of the Company for borrowed money where the
aggregate principal amount so accelerated exceeds $150 million and such
acceleration is not rescinded or annulled within ten days after the written
notice thereof to the Company by the Trustee or to the Company and the Trustee
by the holders of at least 25% in aggregate principal amount of the Debentures
then outstanding, provided, however, that such Event of Default will be cured
or waived if the default that resulted in the acceleration of such other
indebtedness is cured or waived.     
 
  The Indenture provides that the Trustee shall, within ninety days after the
occurrence of a Default with respect to the Debentures, give to the holders of
the Debentures notice of all uncured Defaults known to it; provided that,
except in the case of default in payment on the Debentures the Trustee may
withhold the notice if and so long as a Responsible Officer (as defined in the
Indenture) in good faith determines that withholding such notice is in the
interests of the holders. (Section 6.6 of the Indenture.) "Default" means any
event which is, or after notice or passage of time or both, would be, an Event
of Default. (Section 1.1 of the Indenture.)
 
  The Indenture provides that the holders of a majority in aggregate principal
amount of the Debentures then outstanding may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, provided that such
direction shall not be in conflict with any law or the Indenture and subject to
certain other limitations. (Section 5.8 of the Indenture.) The right of any
holder of Debentures to institute action for any remedy under the Indenture
(except the right to enforce payment of the principal of, interest on, and
premium, if any, on its Debentures when due) is subject to certain conditions
precedent, including a request to the Trustee by the holders of not less than
25% in aggregate principal amount of Debentures then outstanding to take
action, and an offer to the Trustee of satisfactory indemnification against
liabilities incurred by it in so doing (Section 5.9 of the Indenture.)
 
  The Indenture includes a covenant that the Company will file annually with
the Trustee a certificate as to the Company's compliance with all conditions
and covenants of the Indenture. (Section 9.7 of the Indenture.)
 
                                       36

<PAGE>
 
  The holders of a majority in aggregate principal amount of the Debentures
then outstanding by notice to the Trustee may waive, on behalf of the holders
of all the Debentures, any past Default or Event of Default and its
consequences except a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on any of the Debentures and certain
other defaults. (Section 5.7 of the Indenture.)
 
  If a bankruptcy proceeding is commenced in respect of the Company under the
Federal Bankruptcy Code or if the principal amount of the Debentures is
accelerated upon the occurrence of an event of default, the holders of the
Debentures may be unable to recover amounts representing the unamortized
portion of any original issue discount at the time such proceeding is commenced
or such acceleration occurs.
 
AGREED TAX TREATMENT
 
  The Indenture provides that each holder of a Debenture, each person that
acquires a beneficial ownership interest in a Debenture and the Company agree
that for United States federal, state and local tax purposes it is intended
that such Debenture constitute indebtedness. (Section 3.1 of the Indenture.)
 
MODIFICATION OF THE INDENTURE
   
  The Indenture contains provisions permitting the Company and the Trustee to
enter into one or more supplemental indentures without the consent of the
holders of any of the Debentures in order (i) to evidence the succession of
another corporation to the Company and the assumption of the covenants and
obligations of the Company by such successor to the Company; (ii) to add to the
covenants of the Company or surrender any right or power of the Company; (iii)
to add additional Events of Default with respect to any series; (iv) to add or
change any provisions to such extent as necessary to permit or facilitate the
issuance of Debentures in bearer form or in global form; (v) to add to, change
or eliminate any provisions affecting Debt Securities not yet issued; (vi) to
secure the Debentures; (vii) to establish the form or terms of Debt Securities
of any series; (viii) to evidence and provide for successor Trustees; (ix) if
allowed without penalty under applicable laws and regulations, to permit
payment in respect of Debt Securities in bearer form in the United States; (x)
to correct or supplement any defective or inconsistent provisions in the
Indenture or any supplemental indenture, to cure any ambiguity or correct any
mistake or to make any other provisions with respect to matters or questions
arising under the Indenture, provided that such action shall not adversely
affect the interests of the holders of the Debentures; or (xi) to comply with
any requirement of the Commission in connection with the qualification of the
Indenture under the Trust Indenture Act. (Section 8.1 of the Indenture.)     
 
  The Indenture also contains provisions permitting the Company and the
Trustee, with the consent of the holders of a majority in aggregate principal
amount of the Debentures then outstanding, to execute supplemental indentures
adding any provisions to or changing or eliminating any of the provisions of
the Indenture or any supplemental indenture or modifying the rights of the
holders, except that no such supplemental indenture may, without the consent of
each holder, (i) change the time for payment of principal, premium, if any, or
interest on any Debenture; (ii) reduce the principal of, or any installment of
principal of, or interest on any Debenture; (iii) reduce the amount of premium,
if any, payable upon the redemption of any Debenture; (iv) reduce the amount of
principal payable upon acceleration of the maturity of an Original Issue
Discount Security (as defined in the Indenture); (v) change the coin or
currency in which any Debenture or any premium or interest thereon is payable;
(vi) impair the right to institute suit for the enforcement of any payment on
or with respect to any Debenture; (vii) reduce the percentage in principal
amount of the outstanding Debentures the consent of whose holders is required
for modification or amendment of the Indenture or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain default; (viii)
change the obligation of the
 
                                       37

<PAGE>
 
Company to maintain an office or agency in the places and for the purposes
specified in the Indenture; (ix) modify the provisions relating to waiver of
certain defaults or any of the foregoing provisions; or (x) adversely affect
the right to convert Debentures. (Section 8.2 of the Indenture.)
 
THE TRUSTEE
   
  The Bank of New York is the Trustee under the Indenture. The Trustee will
also act as Exchange Agent for the Exchange Offer.     
 
FORM OF DEBENTURES
 
  The Debentures will be issued in fully registered form, without coupons.
Investors may elect to hold their Debentures directly or, subject to the rules
and procedures of DTC described below, hold interests in one or more global
Debentures (the "Global Debentures") registered in the name of DTC or its
nominee.
   
  DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the Banking Law of the State of New York, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Code, and a "clearing agency" registered pursuant
to the provisions of section 17A of the Exchange Act. DTC holds securities that
its participants (the "Participants") deposit with DTC and facilitates the
clearance and settlement of securities transactions among its Participants in
such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations, some
of whom (and/or their representatives) own DTC. Access to DTC's book-entry
system is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. The rules applicable to DTC and its
Participants are on file with the Commission.     
   
  Upon the issuance of a Global Debenture, DTC will credit on its book-entry
registration and transfer system the principal amount of the Debentures
represented by such Global Debenture to the accounts of institutions that have
accounts with DTC. The accounts to be credited shall be designated by the
holders that sold such Debentures to such Participants. Ownership of beneficial
interests in a Global Debenture will be limited to Participants or persons that
may hold interests through Participants. Ownership of beneficial interests in
Global Debenture will be shown on, and the transfer of that ownership will be
effected only through, records maintained by DTC for such Global Debenture and
on the records of Participants (with respect to the interests of persons
holding through Participants). So long as DTC, or its nominee, is the owner of
a Global Debenture, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Debentures represented by such Global Debenture
for all purposes under the Indenture.     
 
  Each person owning a beneficial interest in a Global Debenture must rely on
the procedures of DTC and, if such person is not a Participant, on the
procedures of the Participant through which such person owns its interest, to
exercise any rights of a holder under the Indenture. The Company understands
that under existing industry practices, if it requests any action of holders or
if an owner of a beneficial interest in a Global Debenture desires to give or
take any action which a holder is entitled to give or take under the Indenture,
DTC would authorize the Participants holding the relevant beneficial interests
to give or take such action, and such Participants would authorize beneficial
owners owning through such Participants to give or take such action or would
otherwise act upon the instructions of beneficial owners holding through them.
 
  Principal and interest payments on the Debentures will be made to DTC. The
Company understands that it is DTC's practice to credit any Participant's
accounts with payments in amounts
 
                                       38

<PAGE>
 
proportionate to their respective beneficial interests in the Debentures
represented by the Global Debenture as shown on the records of DTC on the date
payment is scheduled to be made, unless DTC has reason to believe that it will
not receive payment on such date. The Company expects that payments by
Participants to owners of beneficial interests in such Global Debenture held
through such Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers in bearer form or registered in "street name," and will be the
responsibility of such Participants. Accordingly, although owners who hold
Debentures through Participants will not possess Debentures in definitive form,
the Participants will provide a mechanism by which holders of Debentures will
receive payments and will be able to transfer their interests.
 
  Principal and interest payments on Debentures represented by Global
Debentures registered in the name of DTC or its nominee will be made to DTC or
its nominee, as the case may be, as the registered owner of such Global
Debentures. None of the Company, the Trustee or any other agent of the Company
will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interest in
such Global Debentures or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
 
  If DTC or a successor depositor at any time notifies the Company that it is
unwilling or unable to continue as depository of the Global Debentures or if at
any time DTC is no longer eligible under the Indenture, and a successor
depository is not appointed by the Company within ninety days, the Company will
issue Debentures in definitive certificated form in exchange for the Global
Debentures. In addition, the Company may at any time and in its sole discretion
determine not to have Debentures represented by Global Debentures and, in such
event, will issue Debentures in definitive certificated form in exchange for
the Global Debentures. In either case, an owner of a beneficial interest in
Global Debentures will be entitled to have certificated Debentures equal in
principal amount of such beneficial interest registered in its name and will be
entitled to physical delivery of such certificated Debentures. (Section 3.5 of
the Indenture.)
 
SAME-DAY SETTLEMENT IN RESPECT OF GLOBAL DEBENTURES
 
  So long as any Debentures are represented by Global Debentures registered in
the name of DTC or its nominee, such Debentures will trade in DTC's Same-Day
Funds Settlement System, and secondary market trading activity in such
Debentures will therefore be required by DTC to settle in immediately available
funds. No assurance can be given as to the effect, if any, of settlement in
immediately available funds on trading activity in the Debentures.
 
                          DESCRIPTION OF CAPITAL STOCK
   
  The Company's restated certificate of incorporation (the "Restated
Certificate") provides that the authorized capital stock of the Company
consists of (i) 100,000,000 shares of Common Stock, (ii) 16,000,000 shares of
serial preferred stock, without par value (the "Serial Preferred Stock"), of
which (a) 6,000,000 shares are designated as Series A Preferred Stock, (b)
50,000 shares are designated Series B Preferred Stock (the "Series B Preferred
Stock") and (c) 1,250,000 shares are designated Series C Junior Participating
Preferred Stock (the "Series C Preferred Stock"), (iii) 25,000,000 shares of
Class 1 ESOP Convertible Preferred Stock, par value $0.01 per share (the "Class
1 ESOP Preferred Stock"), (iv) 25,000,000 shares of Class 2 ESOP Convertible
Preferred Stock, par value $0.01 per share (the "Class 2 ESOP Preferred Stock"
and together with the Class 1 ESOP Preferred Stock, the "ESOP Preferred
Stock"), (v) 11,600,000 shares of Class P ESOP Voting Junior Preferred Stock,
par value $0.01 per share (the "Class P ESOP Voting Preferred Stock"), (vi)
9,300,000 shares of Class M ESOP Voting Junior Preferred Stock, par value $0.01
per share (the "Class M ESOP Voting Preferred Stock"), (vii) 4,200,000 shares
of Class S ESOP Voting Junior Preferred Stock, par value $0.01 per share (the
"Class S ESOP Voting Preferred Stock" and together with the Class P ESOP Voting
Preferred Stock     
 
                                       39

<PAGE>
 
and the Class M ESOP Voting Preferred Stock, the "Voting Preferred Stock"),
(viii) ten shares of Class I Junior Preferred Stock, par value $0.01 per share
(the "Class I Preferred Stock"), (ix) one share of Class Pilot MEC Junior
Preferred Stock, par value $0.01 per share (the "Class Pilot MEC Preferred
Stock"), (x) one share of Class IAM Junior Preferred Stock, par value $0.01 per
share (the "Class IAM Preferred Stock"), and (xi) ten shares of Class SAM
Junior Preferred Stock, par value $0.01 per share (the "Class SAM Preferred
Stock" and together with the Class Pilot MEC Preferred Stock and the Class IAM
Preferred Stock, the "Employee Director Preferred Stock;" the Employee Director
Preferred Stock together with the Class I Preferred Stock, the "Director
Preferred Stock"). Together the shares of Serial Preferred Stock, ESOP
Preferred Stock, Voting Preferred Stock and Director Preferred Stock are
referred to as the "Preferred Stock." Shares of Serial Preferred Stock not
otherwise designated may be issued from time to time in one or more series,
without stockholder approval (unless the Serial Preferred Stock would rank
prior to the ESOP Preferred Stock in which case such issuance shall be subject
to the approval of each class of ESOP Preferred Stock, voting separately as a
class), with such powers, preferences and relative, participating, optional or
other special rights, and qualifications, limitations, or restrictions thereof
as may be adopted by the Board or a duly authorized committee thereof.
   
  As of January 31, 1995, the outstanding capital stock of the Company
consisted of (i) 12,434,294 shares of Common Stock, (ii) 5,999,900 shares of
Series A Preferred Stock, (iii) 13,079.6 shares of Series B Preferred Stock,
issued in the form of depositary preferred shares each representing one one-
thousandth of a share of Series B Preferred Stock, (iv) 1,789,585 Shares of
Class 1 ESOP Preferred Stock, (v) no shares of Class 2 ESOP Preferred Stock,
(vi) one share of Class P ESOP Voting Preferred Stock, one share of Class M
ESOP Voting Preferred Stock and one share of Class S ESOP Voting Preferred
Stock, each owned of record by the trustee of the ESOP trusts, (vii) one share
of Class Pilot MEC Preferred Stock held by the United Airlines Pilots Master
Executive Counsel ("ALPA-MEC") of the Air Line Pilots Association,
International ("ALPA"), (viii) one share of Class IAM Preferred Stock held by
the International Association of Machinists and Aerospace Workers (the "IAM"),
(ix) three shares of Class SAM Preferred Stock, two held by the salaried and
management director of the Company (the "Salaried and Management Director"),
and one share owned by the senior executive of United with primary
responsibility for human resources (the "SAM Designated Stockholder") and (x)
four shares of Class I Preferred Stock, one held by each of the independent
directors of the Company (the "Independent Directors"). Additional shares of
ESOP Preferred Stock will not be outstanding but will be recorded on the books
of the Company as book-entry shares ("Book-Entry Shares"). See "--The ESOP
Preferred Stock." All of the outstanding shares of Common Stock and Preferred
Stock are, and the shares of Common Stock issuable upon conversion of the
Debentures will be, validly issued, fully paid and nonassessable.     
 
CORPORATE GOVERNANCE
 
 Composition of the Board
 
  Subject to the rights of holders of Series A Preferred Stock and the holders
of the Series B Preferred Stock to elect a total of two additional directors in
the event of certain dividend arrearages (the "Preferred Stock Dividend Default
Rights"), and prior to the Sunset, the Board will consist of 12 directors, who
include (i) five Public Directors (as defined below), (ii) four Independent
Directors (as defined below), (iii) two Union Directors (as defined below) and
(iv) one Salaried and Management Director (as defined below) (the Union
Directors and the Salaried and Management Director, collectively, are referred
to as the "Employee Directors"). Following the Sunset, subject to the Preferred
Stock Dividend Default Rights and the occurrence of either or both of the ALPA
Termination Date and the IAM Termination Date (both as defined below, see "--
Sunset"), the Board will consist of 12 directors of whom nine will be elected
by the holders of the Common Stock and three will be Employee Directors,
elected as described below.
 
                                       40

<PAGE>
 
 Public Directors
 
  Five directors (the "Public Directors") are elected by holders of the Common
Stock and consist of (a) three individuals who are not and have never been an
officer or employee of, or a provider of professional services to, the Company
or any of its subsidiaries (the "Outside Public Directors") and (b) two
substantially full-time employees of the Company or any of its subsidiaries,
one of whom, in addition, to the fullest extent such additional qualification
is permitted by law, will be, at the time of election, the CEO, and the other
of whom, in addition, to the fullest extent such additional qualification is
permitted by law, will be a senior executive officer of the Company
satisfactory to the CEO (the "Management Public Directors"). At the expiration
of the term of each Outside Public Director and to fill vacancies, Outside
Public Directors will be nominated or appointed, as appropriate, by an "Outside
Public Director Nomination Committee" comprised of the Outside Public
Directors. Any amendment or modification of the rights, powers, privileges or
qualifications of the Outside Public Directors or the Outside Public Director
Nomination Committee will, in addition to the approval required by law or as
described below under the Restated Certificate, require the concurrence of all
of the Outside Public Directors or the affirmative vote of at least a majority
in voting power of the outstanding capital stock of the Company entitled to
vote thereon excluding shares held by the ESOP Trustee. In addition, Management
Public Directors are nominated or appointed, as appropriate, by a majority vote
of the entire Board.
 
 Independent Directors
 
  The four Independent Directors have been elected by the holders of Class I
Preferred Stock. Each Independent Director, upon becoming an Independent
Director, acquired a share of Class I Preferred Stock and became a party to the
Class I Preferred Stockholders' Agreement pursuant to which the stockholders
have agreed to vote their shares to elect the Independent Directors nominated
in accordance with the procedures set forth below and to refrain from
transferring their shares of Class I Preferred Stock other than to a person who
has been elected to serve as an Independent Director and who agrees to be
subject to the provisions of the Class I Preferred Stockholders' Agreement.
 
  None of the Independent Directors may have, without the consent of both Union
Directors and all of the Public Directors, a current or prior material
affiliation or business relationship with the Company (other than an
affiliation that results from being a member of the Board) or be an officer,
director, trustee or official of any labor organization that serves as a
collective bargaining "representative" under the Railway Labor Act or the
National Labor Relations Act. In addition, generally, at least two of the four
Independent Directors at the time of their initial nomination or appointment to
the Board must (i) be a senior executive officer of a private or public company
with revenues in excess of $1 billion during such company's prior fiscal year
and/or (ii) be a member of the board of directors of at least one other public
company with a market capitalization in excess of $1 billion as of the date of
such company's most recent annual financial statements.
 
  The Independent Directors are nominated or appointed, as appropriate, by an
"Independent Director Nomination Committee" consisting of the Independent
Directors and the Employee Directors. Approval of such nomination or
appointment requires a majority of the Independent Directors and the
concurrence of at least one Union Director.
 
 Employee Directors
 
  The three Employee Directors are elected as follows: (i) one director (the
"ALPA Director") is elected by the holder of the Class Pilot MEC Preferred
Stock, (ii) one director (the "IAM Director" and, together with the ALPA
Director, the "Union Directors") is elected by the holder of the Class IAM
Preferred Stock, and (iii) the Salaried and Management Director is elected by
the holders of the Class SAM Preferred Stock, each selected as described below.
 
                                       41

<PAGE>
 
  The replacement Salaried and Management Director will be nominated by the
System Roundtable. The System Roundtable will establish a selection committee
of four employees to select the nominee for Salaried and Management Employee
Director from time to time. The Salaried and Management Director and the SAM
Designated Stockholder are parties to the Class SAM Preferred Stockholders'
Agreement pursuant to which the stockholders have agreed to vote their shares
to elect the Salaried and Management Director nominated by the System
Roundtable and to refrain from transferring the shares of Class SAM Preferred
Stock other than to a person who has been elected to serve as the Salaried and
Management Director or to the senior executive of United who has primary
responsibility for human resources and, in each case, who agrees to be subject
to the provisions of the Class SAM Preferred Stockholders' Agreement. The
"System Roundtable" is a body of salaried and management employees of United
empaneled to review and discuss issues relating to the Company and their effect
on salaried and management employees.
 
  Vacancies of Employee Directors may be filled only by the holder or holders
of the class of stock that elected such director.
 
 Quorum
 
  The Restated Certificate provides that until the Sunset, a quorum at a Board
meeting will exist only if (a) directors with at least a majority of the votes
entitled to be cast by the entire Board are present and (b) unless consented to
by the two Union Directors, if less than all votes are present, the number of
votes constituting a majority of the votes present is no greater than the sum
of (i) two plus (ii) the number of Independent Director votes present at the
meeting.
 
 Required Board Action
   
  Except as required by law or as set forth in the Restated Certificate,
approval of all Board action requires a majority vote of the total number of
director votes present at a meeting at which a quorum is present. Until the
Sunset, in the event of a vacancy on the Board of an Independent Directorship,
the remaining Independent Directors will as a group continue to have four votes
(divided equally among the remaining Independent Directors). Until the Sunset,
in the event of a vacancy on the Board of an Employee Directorship or a Public
Directorship, or in the event of a vacancy of an Independent Directorship that
immediately prior to the occurrence of such vacancy was held by a member of a
Board committee of which only one Independent Director was a member, then,
subject to the fiduciary duties of the remaining Directors or members of such
Board committee, as the case may be, then in office, neither the Board nor such
Board committee may take any action (other than to fill such vacancy) until
after the earlier of (i) 20 days following the occurrence of such vacancy and
(ii) the time that such vacancy is filled in accordance with the Restated
Certificate.     
 
 Term of Office; Resignation; Removal
   
  Each Director holds office until the next annual meeting of stockholders and
until his or her successor is elected and qualified, subject to such Director's
earlier death, resignation or removal. In addition, the term of an Outside
Public Director or an Independent Director automatically terminates if such
Director ceases to meet the qualifications of an Outside Public Director or
Independent Director, as the case may be. Any Director may resign at any time
upon written notice to the Company. Directors may not be removed from office
except (i) without cause, by the class of stockholders that elected them, or
(ii) "for cause" as determined under the DGCL.     
 
 Officers
 
  All decisions to hire or fire members of senior management (other than the
CEO) are taken by the board or pursuant to the authority typically delegated by
it to the CEO. Until the Sunset, hiring a new
 
                                       42

<PAGE>
 
   
CEO requires the approval of a majority of the Board following a recommendation
by the Executive Committee, which will act as a search committee. If at the
first meeting of stockholders following the hiring of a new CEO (other than the
initial CEO following the Recapitalization), such CEO is not elected to the
Board as a Public Director by the stockholders entitled to vote on such
election, such CEO will be removed from office and a successor CEO will be
selected. Any successor CEO will be appointed to fill the Public Directorship
vacated by the predecessor CEO.     
 
 Stockholder Approval Matters
   
  Stockholder approval is not a condition to any action of the Company except
(i) as required by DGCL, or (ii) as described below under "--Extraordinary
Matters," "--Special Voting Provisions with Respect to Purchase and Sale of
Common Stock" or "--The ESOP Preferred Stock--Voting Rights." Until the Sunset,
except as otherwise required by law or by the Restated Certificate, the
presence in person or by proxy of the holders of outstanding shares
representing at least a majority of the total voting power of all outstanding
shares entitled to vote at a meeting of stockholders will constitute a quorum
at a meeting of stockholders.     
 
 ESOP Voting
   
  Allocated shares of Voting Preferred Stock (and, under any limited
circumstances required by law or the Restated Certificate in which matters are
submitted to it for a vote, the ESOP Preferred Stock) held by the tax-qualified
employee stock ownership plan (as defined under "--The ESOP Preferred Stock")
will be voted by participants, as named fiduciaries under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), on a confidential
pass-through basis. The ESOP Trustee (as defined below) is obligated to vote as
instructed by the participants to whom the Voting Preferred Stock has been
allocated, and the shares which are allocated command the entire voting power
of each class of Voting Preferred Stock. ALPA has made an agreed-upon election
pursuant to which the shares of Class P Voting Preferred Stock allocated to
former employees who were ALPA members will be voted by the ESOP Trustee.
Unallocated shares and allocated shares which were not voted by the
participants in the Qualified ESOP will be voted as described below by those
ESOP participants who are employees who choose so to direct the ESOP Trustee.
The ESOP Trustee will (except as may be required by law) vote the unallocated
and otherwise unvoted shares in the proportions directed by participants who
give instructions to the ESOP Trustee with respect to such shares; each
participant who is an employee has the right to give such directions to the
ESOP Trustee in proportion that the participant's allocated shares bears to the
allocated shares of all participants giving such directions. Shares held by the
Supplemental ESOP will be voted as instructed by the administrative committee
appointed under the Supplemental ESOP. The Supplemental ESOP provides that the
administrative committee shall consider the sentiments of participants
concerning the vote, but is not required to take any particular action in
response thereto. The Supplemental ESOP provides that it shall be amended at
the request of ALPA to provide for pass-through voting by participants. The
foregoing provisions also govern instructions to be given to the ESOP Trustee
in the event of a tender offer.     
 
 Extraordinary Matters
 
  Certain matters, defined as "Extraordinary Matters" generally require, in
addition to any voting requirements under the DGCL, approval of at least either
three-quarters of the Board (including the concurrence of one Union Director)
or three-quarters of the shares present and voting at a stockholder meeting at
which a quorum is present. In addition, the vote of at least 66 2/3% of the
outstanding voting stock that is not owned by an "interested stockholder" is
required to approve a "business combination" under Section 203 of the DGCL,
where applicable. Extraordinary Matters include:
 
    (a) Amendments to the Restated Certificate (other than certain technical
  amendments), substantive amendments to the Bylaws and mergers or
  consolidations of the Company or any of
 
                                       43

<PAGE>
 
  its subsidiaries or a sale, lease or exchange of all or substantially all
  of the assets of the Company or United involving a person that has been
  formed by or is an affiliate of one or more labor groups representing
  employees of the Company or any of its subsidiaries or a person determined
  by the Board to be a person in which a substantial group of employees of
  the Company or any of its subsidiaries, acting as an organized group, owns
  a majority ownership interest (a "Labor Affiliate") (the Extraordinary
  Matters described in this paragraph (a) require, in addition to the
  approvals described above, either (i) six affirmative votes cast by
  Directors who are not Employee Directors or (ii) the affirmative vote of a
  majority of the shares of capital stock not held by ESOPs);
 
    (b) Mergers or consolidations of the Company or any of its subsidiaries
  or a sale, lease or exchange of all or substantially all of the assets of
  the Company or United involving a person who is not a Labor Affiliate;
 
    (c) Dissolutions;
 
    (d) Entry into any new line of business outside the "airline business"
  (defined generally as the business of operating a domestic air carrier,
  together with any business or activities reasonably related to or in
  support of all such operations engaged in by the Company or any subsidiary
  at or immediately prior to the Effective Time), or the making of any
  investment (in excess of five percent of the total assets of the Company
  and its subsidiaries on a consolidated basis) outside the airline business;
 
    (e) The making of any domestic airline acquisition or any material
  investment in another airline including ordinary course investments in
  excess of one half of one percent of the total assets of the Company and
  its subsidiaries on a consolidated basis;
 
    (f) The adoption of any material amendment to the Rights Agreement (as
  defined below, see "--Preferred Share Purchase Rights") or taking of any
  material actions, including the redemption of rights, under the Rights
  Agreement;
 
    (g) The sale, lease, exchange, surrender to or at the direction of a
  lessor, or other disposition (a "Disposition") by the Company or any of its
  Subsidiaries of assets for "Gross Proceeds" (defined to exclude taxes and
  sales costs) that, when added to the Gross Proceeds from (i) the
  Disposition of other such assets during the preceding 365 day period
  resulting in Gross Proceeds in excess of $5 million and (ii) the
  Disposition of other such assets during a recently completed preceding
  twelve calendar month period resulting in Gross Proceeds of $5 million or
  less, collectively exceeds $200 million; provided that (A) Gross Proceeds
  included in clauses (i) and (ii) will not include Gross Proceeds from any
  transactions consummated prior to the Effective Time and (B) the $5 million
  set forth in clauses (i) and (ii) may be increased by action of the Board
  on an annual basis based on the affirmative vote of at least 75% of the
  votes entitled to be cast by the entire Board, which must include the
  concurrence of at least one Union Director; provided, further, that such
  approval will not be required for certain specified transactions (or count
  against the $200 million Gross Proceeds calculation above) including: (1)
  secured aircraft financings, (2) sale-leaseback and leveraged lease
  transactions, or sales or similar transfers of receivables, for financing
  purposes, (3) Dispositions of assets if replacement assets (consisting of
  assets of the same class as the assets being disposed of) generally have
  been ordered or acquired within the six calendar month period prior to such
  Dispositions of assets or so ordered or acquired within 365 days following
  the Disposition of assets for which no replacement assets had been
  previously acquired, (4) Dispositions provided Gross Proceeds in an amount
  up to 10% of the book value (net of depreciation) of the Company's fixed
  assets at the time of the most recent quarterly financial statements of the
  Company if (A) Directors entitled cast at least 75% of the votes entitled
  to be cast by the entire Board, including all of the Independent Directors,
  determine by resolution of the Board that such asset Disposition is
  necessary to (I) cure a default under material financing agreements binding
  upon the Company or any of its subsidiaries or any of their respective
  properties, or avoid a default thereunder that, absent such Disposition,
  would be reasonably likely to occur within 90 days or (II) remedy a
  material adverse development in the Company's business
 
                                       44

<PAGE>
 
     
  or condition, and (B) the Gross Proceeds of such asset Disposition are used
  to remedy the condition referred to in clause (A) (provided, that the
  exception afforded by this clause (4) will be available not more than once
  in any consecutive five-year period), (5) certain ordinary course
  Dispositions designed to allow the Company and its subsidiaries to continue
  many of their existing practices without significant restrictions that may
  involve Dispositions of assets, (6) Dispositions of assets (other than air
  frames, engines and related spare parts) if (A) made pursuant to a discrete
  asset management program that provides for the Disposition of not more than
  an aggregate of $25 million of assets and (B) such discrete asset
  management program is approved annually by either the Board or the
  stockholders as an Extraordinary Matter in accordance with the voting
  thresholds outlined above, and (7) Dispositions of assets that
  individually, or when aggregated with other assets in the same or related
  Dispositions, are not in excess of a de minimis amount, either with respect
  to periods prior to December 31, 1994 or pursuant to a distinct asset
  management program approved in accordance with the procedures set forth in
  clause (6) above; and     
     
    (h) The issuance of equity or equity equivalent securities (including
  convertible debt, but excluding non-voting, non-convertible preferred
  stock) (a "Non-Dilutive Issuance"); provided that such issuance shall not
  constitute an Extraordinary Matter if any of the following occur: (A) (I)
  three-quarters of the votes entitled to be cast by the entire Board,
  including all the Independent Directors, determine that such issuance is in
  the best interests of the Company, (II) such issuance is subject to the
  First Refusal Agreement (as defined below, see "--Common Stock--Right of
  First Refusal") and (III) if such issuance occurs on or prior to July 12,
  1995, the Board by the affirmative vote of a majority of the votes entitled
  to be cast by the Directors present at a meeting of the Board at which a
  quorum is present, which vote must include the affirmative votes of both
  Union Directors, approves an equitable adjustment to the number of
  Additional Shares (as defined, see "--Establishment of ESOPs--Additional
  Shares") to be issued pursuant to the Plan of Recapitalization, (B) three-
  quarters of votes entitled to be cast by the entire Board, including all
  the Independent Directors, determine (I) that the Company is insolvent (or,
  absent a material positive change in the Company's results of operations
  over the immediately succeeding 90 days from the results contained in the
  Company's regularly prepared projections, that the Company will become
  insolvent within 90 days), which determination is confirmed by written
  opinions of two nationally recognized investment banking firms that further
  opine (giving effect to the facts and circumstances applicable to the
  Company, including discussions with prospective equity investors) that the
  sale of equity securities is necessary to avoid or remedy such insolvency
  (the "Bankruptcy Opinions") and (II) that, after giving effect to the
  proposed issuance of additional equity securities (the "Permitted
  Bankruptcy Equity"), the Company would no longer be or not become
  "insolvent" in the time frame referred to in the Bankruptcy Opinions (the
  "Solvency Determination") and such issuance of Permitted Bankruptcy Equity
  satisfies the following three conditions: (X) such issuance does not exceed
  the amount determined by the Board to be reasonably necessary to allow the
  Board to make the Solvency Determination, (Y) a binding commitment for the
  sale of such Permitted Bankruptcy Equity is entered into within 90 days of
  the delivery of the Bankruptcy Opinions and (Z) the terms of the First
  Refusal Agreement have been complied with in all material respects by the
  Company, or (C) such issuance is pursuant to (I) the exercise, conversion
  or exchange of equity securities outstanding immediately prior to July 12,
  1994, (II) the Company's 1981 Incentive Stock Plan, 1988 Restricted Stock
  Plan or Incentive Plan, each as amended in accordance with the Plan of
  Recapitalization, (III) the UAL Corporation 1992 Stock Plan for Outside
  Directors or (IV) any other equity incentive compensation plan approved by
  the affirmative vote of three-quarters of the votes entitled to be cast by
  the entire Board, including all the Independent Directors.     
 
 Special Voting Provisions with Respect to Purchase and Sale of Common Stock
 
  Until the Sunset, any purchases of Common Stock by the Company (other than to
fulfill its obligations to issue or retain shares of Common Stock in connection
with the exercise of employee options issued pursuant to employee benefit plans
or to retain shares of Common Stock in connection
 
                                       45

<PAGE>
 
with tax withholding obligations in connection with the exercise of employee
options or restricted stock), or any sale by the Company of any shares of
Common Stock to a Company-sponsored pension, retirement or other employee
benefit plans for the account of employees (other than pursuant to the First
Refusal Agreement or in connection with the creation and operation of the ESOPs
to which the ESOP Preferred Stock is issued), whether for cash or non-cash
consideration, including without limitation, employee concessions, must be
approved by a majority of the Board, including at least 80% of the votes of the
Public Directors.
 
 Nondilution
 
  The holders of Voting Preferred Stock vote as a single class with the holders
of the Common Stock and the Employee Director Preferred Stock and represent
approximately 55% of the votes to be cast on matters submitted to the vote of
the Common Stock, Employee Director Preferred Stock and the Voting Preferred
Stock (other than the election of Directors and such matters for which a vote
by separate class is required under the DGCL). The number of votes represented
by such Voting Preferred Stock is subject to increase on July 12, 1995 as
described in "--The Voting Preferred Stock--Voting Rights." The Voting
Preferred Stock will generally continue to represent approximately 55% of the
aggregate voting power of the Common Stock, the Employee Director Preferred
Stock and the Voting Preferred Stock, as adjusted under certain circumstances,
until the Sunset.
 
 Sunset
 
  The "Sunset" will occur when (i) the Common Stock issuable upon conversion of
the outstanding ESOP Preferred Stock, plus (ii) any Common Equity and Available
Unissued ESOP Shares held in the ESOPs, in any other employee benefit plans
sponsored by the Company or any of its subsidiaries for the benefit of its
employees, represent, in the aggregate, less than 20% of the Common Equity and
Available Unissued ESOP Shares of the Company. "Common Equity" is defined as,
in the aggregate and without double-counting, (i) the Common Stock outstanding
at the time in question, (ii) the Common Stock issuable upon conversion of the
ESOP Preferred Stock and Voting Preferred Stock outstanding at the time in
question, (iii) the Common Stock which is both (x) issuable upon exercise,
conversion or exchange of Equity Securities and (y) included in the definition
of "Fully Diluted Shares" (as defined in the Recapitalization Agreement), and
(iv) the Common Stock represented by the Permitted Bankruptcy Equity
outstanding at the time in question, if any; but excluding any Equity
Securities (other than Permitted Bankruptcy Equity, Equity Securities issued in
connection with the Recapitalization, any Class 2 ESOP Preferred Stock that may
be issued and Equity Securities included in the definition of Fully Diluted
Shares, as well as any other Equity Securities issued upon exercise or
conversion of any such Permitted Bankruptcy Equity or any other such Equity
Securities) issued in connection with a Non-Dilutive Issuance, including,
without limitation, any Equity Securities (a) outstanding immediately prior to
the Recapitalization that were not included in the definition of Fully Diluted
Shares or (b) issued under the circumstances described in paragraph (h)(A)
under "--Extraordinary Matters" or paragraph (h)(C)(II), (III) or (IV) under
"--Extraordinary Matters" (including, in each case the shares of Equity
Securities underlying such Equity Securities or issuable upon the exercise,
conversion or exchange thereof). "Available Unissued ESOP Shares" is generally
defined as the number of shares of Common Stock to be issued in connection with
the ESOPs which have not yet been issued.
 
  If the Sunset occurs, the Company will file a restated certificate of
incorporation providing for more customary corporate governance provisions, the
number of Directors will remain at 12 (of which three will be Employee
Directors), the Outside Public Director Nomination Committee will nominate the
Board's nominees for election of directors (other than the Employee Directors)
to be elected by the stockholders at a meeting which will be held promptly
thereafter and upon the effectiveness of such election the term of the then
incumbent Directors will terminate, and there will be no special director or
voting rights, except that (a) the ALPA Director will be elected by the holder
of the Class Pilot MEC
 
                                       46

<PAGE>
 
Preferred Stock until the ALPA Termination Date, the IAM Director will be
elected by the holder of the Class IAM Preferred Stock until the IAM
Termination Date and the Salaried and Management Director will be elected by
the holders of the Class SAM Preferred Stock until the earlier of the ALPA
Termination Date and the IAM Termination Date, each voting separately in a
class, and (b) the Union Directors would continue to serve on Committees as
provided below.
 
  Under current actuarial assumptions, the Company estimates that the Sunset
will occur in the year 2016 if no additional purchases were made by eligible
employee trusts and retirement plans. However, employees have the right to, and
may be expected to, make additional purchases through such trusts and plans
that will have the effect of delaying the Sunset. In certain circumstances
described under "--The Director Preferred Stock--Uninstructed Trustee Action,"
the Sunset may not occur until 2010 even though the conditions for the Sunset
have occurred. The Common Stock issuable or issued upon conversion of the
Series A Preferred Stock is considered Common Equity for purposes of Sunset and
the actuarial assumptions used in estimating the Sunset date assume that all
Series A Preferred Stock is converted into Common Stock and none is redeemed or
repurchased by the Company. However, neither the Debentures nor any Common
Stock issued upon conversion thereof are considered Common Equity under the
Restated Certificate. Accordingly, the Company estimates that the exchange of
the Series A Preferred Stock in the Exchange Offer can be expected, based on
such actuarial assumptions and all other things being equal, to delay the
occurrence of the Sunset by approximately one year, assuming all of the
outstanding Series A Preferred Stock is exchanged for Debentures in the
Exchange Offer.
 
 Committees
 
  The Restated Certificate provides that until the Sunset the following
committees will constitute the Board committees: the Audit Committee, the
Competitive Action Plan ("CAP") Committee, the Compensation Committee, the
Compensation Administration Committee, the Executive Committee, the Independent
Director Nomination Committee, the Labor Committee, the Outside Public Director
Nomination Committee and the Transaction Committee (collectively, the
"Committees"). In addition, the Board may, by resolution passed by the
affirmative vote of 80% of the votes of the entire Board, including the
affirmative vote of at least one Union Director, designate one or more other
committees of the Board, and it has exercised such power to create a Pension
and Welfare Plan Oversight Committee ("PAWPOC"). Except as provided below, any
act of a Committee will require the affirmative vote of a majority of the votes
entitled to be cast by the Directors present at a meeting of such Committee and
entitled to vote on the matter in question. The Restated Certificate contains
certain provisions relating to the required quorum for committee action.
 
  The Audit Committee consists of the four Independent Directors and the three
Outside Public Directors or such fewer number of such Directors (in as nearly
as practicable that same proportion of Independent Directors and Outside Public
Directors) as shall qualify for audit committee membership under applicable
rules of the securities exchanges or other similar trading market on which the
Common Stock is traded. The Audit Committee is primarily concerned with (i)
reviewing the professional services and independence of the Company's
independent auditors and the scope of the annual external audit as recommended
by the independent auditors, (ii) ensuring that the scope of the annual
external audit is sufficiently comprehensive, (iii) reviewing, in consultation
with the independent auditors and the internal auditors, the plan and results
of the annual external audit, the adequacy of the Company's internal control
systems and the results of the Company's internal audits, and (iv) reviewing,
with management and the independent auditors, the Company's annual financial
statements, financial reporting practices and the results of each external
audit. The Audit Committee also has the authority to consider the
qualifications of the Company's independent auditors, to make recommendations
to the Board as to their selection and to review and resolve disputes between
such independent auditors and management relating to the preparation of the
annual financial statements.
 
                                       47

<PAGE>
 
   
  The CAP Committee consists of eight Directors, including four Public
Directors, two Independent Directors and the two Union Directors. Of the four
Public Directors, three must be Outside Public Directors and one must be the
CEO (if the CEO is a Public Director). The two Independent Director members are
appointed by the Independent Director Nomination Committee which appointment
requires the affirmative vote of all of the votes entitled to be cast by the
Independent Directors. The function of the CAP Committee is to oversee
implementation of the Company's Competitive Action Plan. The CAP Committee has
the exclusive authority, acting for and on behalf of the Board and consistent
with the protection of the interests of the holders of Common Stock to approve
on behalf of the Company any and all modifications of or amendments to the
Competitive Action Plan. However, to the extent such modifications or
amendments relate to changes to any provision of the revised Collective
Bargaining Agreements with the IAM and ALPA, the two Union Directors on the CAP
Committee are neither entitled to vote nor counted in determining the presence
of a quorum of such committee in connection therewith. Notwithstanding the
foregoing, only the Labor Committee may approve on behalf of the Company any
such changes to such Collective Bargaining Agreements. In addition, the CAP
Committee has the exclusive authority, acting for and on behalf of the Board,
to approve on behalf of the Company any and all modifications of or amendments
to the salaried and management employee investment described in "--Investment
for Salaried and Management Employees." Such modifications or amendments must
be approved by the affirmative vote of at least a majority of the votes of the
entire CAP Committee, including both Union Directors and all of the Outside
Public Directors.     
   
  The Compensation Committee consists of seven Directors, including two
Independent Directors, two Public Directors and three Employee Directors. Of
the two Public Directors, one must be an Outside Public Director appointed by
the Outside Public Director Nomination Committee, and one must be the CEO (if
the CEO is a Public Director). The two Independent Director members are
appointed by the unanimous approval of the Independent Director Nomination
Committee. The principal functions of the Compensation Committee are to review
and recommend to the Board the compensation and benefit arrangements to be
established for the officers of the Company and to review general policy
matters relating to compensation and benefit arrangements of non-union
employees of the Company. The Compensation Committee also administers the stock
option plans and executive compensation programs of the Company, including
bonus and incentive plans applicable to officers and key employees of the
Company. Subject to the final approval of the Compensation Committee (except as
described in the following paragraph), the Compensation Committee may delegate
to the Compensation Administration Committee specific responsibilities with
respect to the compensation of the CEO.     
 
  The Compensation Administration Committee consists of two Independent
Directors and one Outside Public Director, each of whom is (a) a "disinterested
person" or "disinterested administrator" or any related successor concept under
Rule 16b-3 (or any successor provision) promulgated pursuant to Section 16 of
the Exchange Act and (b) an "outside director" or any related successor concept
under Section 162(m) (or any successor provision) of the Code. The Outside
Public Director is appointed by the Outside Public Director Nomination
Committee. The two Independent Directors are appointed by the Independent
Director Nomination Committee, which appointment shall require the affirmative
vote of all the Independent Directors. The principal function of the
Compensation Administration Committee is to administer the stock option plans
and executive compensation programs of the Company to the extent such functions
cannot or are not appropriate to be performed by the Compensation Committee in
light of any provision of the Internal Revenue Code, the securities laws, any
other applicable law or any regulations promulgated under any of the foregoing.
Any action of the Compensation Administration Committee must also be approved
by the Compensation Committee, unless such approval could reasonably be
expected to prevent a stock option plan or executive compensation program, or a
component thereof, that is intended to qualify under Rule 16b-3 (or any
successor provision) or to qualify for an exception under such Section 162(m)
(or any successor provision) from receiving the benefits of Rule 16b-3 or
qualifying for such exception, respectively.
 
                                       48

<PAGE>
 
  The Executive Committee is comprised of two Independent Directors, two Public
Directors (the CEO, if the CEO is a Public Director, and one Outside Public
Director) and two Union Directors. Subject to the DGCL, the Executive Committee
has all the powers of the Board to manage the affairs of the Company except
that it does not have the authority to act with respect to any of the
"Extraordinary Matters" discussed above, to take any action as to matters
specifically vested in other Committees or take any action that may be taken by
the Board only with a vote greater than or additional to a majority of the
Board. In the event a new CEO is to be selected prior to the Sunset, the
Executive Committee will function as a search committee to identify a successor
CEO.
 
  The Labor Committee consists of three or more Directors, including one
Outside Public Director, at least one Independent Director and at least one
other Director, as designated by the Board, but may not include any Employee
Directors. The Labor Committee has the exclusive authority on behalf of the
Board to approve on behalf of the Company the entering of, or any modification
or amendment to, a collective bargaining agreement for U.S. employees to which
the Company or any of its subsidiaries is a party.
 
  The Transaction Committee consists of seven Directors, consisting of the four
Independent Directors and the three Outside Public Directors. The function of
the Transaction Committee is to evaluate and advise the Board with respect to
any proposed merger or consolidation of the Company or any of its Subsidiaries
with or into, the sale, lease or exchange of all or substantially all of the
Company's or any of its Subsidiaries' property or assets to, or a significant
business transaction with, any Labor Affiliate.
 
  PAWPOC consists of six Directors, consisting of two Independent Directors,
one Outside Public Director and three Employee Directors. The function of
PAWPOC is to exercise oversight with respect to compliance by the Company and
its subsidiaries with laws governing employee benefit plans maintained by the
Company and its subsidiaries and subject to the provisions of ERISA.
 
 Amended and Restated Bylaws
   
  The Company's restated bylaws (the "Restated Bylaws") provide that until the
Sunset, many matters will be governed by the Restated Certificate including,
among others: (i) quorum requirements at any meeting of the stockholders, the
Board or any Board Committee; (ii) the number, composition and term of office
of Directors; (iii) removal of Directors; (iv) filling of vacancies on the
Board and on Board Committees; (v) designation of Board Committees; (vi) the
composition, function and powers of the Executive Committee; (vii) the
appointment, term of office, filling of vacancies and removal of officers of
the Company; and (viii) any substantive amendment to the Restated Bylaws.
Further the Restated Bylaws provide that, subject to certain exceptions,
following the Sunset many provisions of the Company's Bylaws prior to their
restatement in connection with the Recapitalization will be reinstated.     
   
  The Restated Bylaws also: (i) govern the ability, until the Sunset, of any
two Directors, the CEO or the secretary of the Company to call a special
meeting of the Board; (ii) require, until the Sunset, subject to the fiduciary
obligations of the Directors, that the CEO will be elected as one of the
Management Public Directors; (iii) provide that the term of office of the CEO
(other than Mr. Greenwald as the initial CEO) will automatically terminate if
he or she is not elected as Management Public Director by the stockholders at
the first meeting of stockholders for the election of directors at which he or
she is eligible for nomination as a Management Public Director; and (iv)
require, until the Sunset, that non-substantive amendments to the Restated
Bylaws may be adopted either by a majority vote of the entire Board or by 75%
of the voting power of the stock entitled to vote at a stockholder meeting in
which a quorum is present. In addition, the Restated Bylaws contain other
procedural sections, some of which operate only until the Sunset and some of
which become operative only after the Sunset.     
 
                                       49

<PAGE>
 
COMMON STOCK
 
  Dividend Rights. Holders of Common Stock are entitled to receive dividends
when, as and if declared by the Board out of funds legally available therefor,
provided that, so long as any shares of Preferred Stock are outstanding, no
dividends (other than dividends payable in common stock) or other distributions
may be made with respect to the Common Stock unless full cumulative dividends
on the shares of Preferred Stock have been paid. The Company has not paid cash
dividends on the Common Stock since the third quarter of 1987.
 
  As a holding company, the Company relies on distributions from United to pay
dividends on its capital stock. There are currently no contractual restrictions
on United's ability to pay dividends to the Company.
 
  Voting Rights. The holders of the Common Stock are entitled to cast one vote
per share. Prior to the Sunset, the holders of the Common Stock, the holders of
the Employee Director Preferred Stock and the holders of the Voting Preferred
Stock vote together as a single class with respect to all matters submitted to
the vote of the holders of Common Stock pursuant to law or as provided in the
Restated Certificate except with respect to (a) such matters upon which the
DGCL requires a separate class vote and (b) the election of the Public
Directors, whom the holders of the Common Stock elect separately as a class.
Until the Sunset, the holders of the Common Stock do not vote to elect any
directors other than the Public Directors. After the Sunset, the holders of the
Common Stock, the holders of the Employee Director Preferred Stock and the
holders of the Voting Preferred Stock will continue to vote together as a
single class with respect to all matters submitted to the vote of the holders
of Common Stock pursuant to law or as provided in the Restated Certificate
except with respect to such matters upon which the DGCL requires a separate
class vote. See "--The Voting Preferred Stock--Voting Rights."
   
  Right of First Refusal. The Company has entered into a First Refusal
Agreement (the "First Refusal Agreement") with ALPA, the IAM and the Salaried
and Management Director (solely as the representative of the Salaried and
Management Employees) pursuant to which the Company has agreed that, subject to
certain exceptions, if it proposes to issue any shares of Common Stock or other
securities that are exchangeable for or convertible into shares of Common Stock
(collectively, the "Equity Securities"), it must first offer such Equity
Securities to ALPA and the IAM on behalf of the employees represented thereby
and to the Salaried and Management Employees on the same terms and conditions
upon which the Company proposes to sell such Equity Securities to a third
party. Under the First Refusal Agreement, the members of ALPA will be entitled
to purchase 46.23% of the Equity Securities offered, the members of the IAM
will be entitled to purchase 37.13% of the Equity Securities offered and the
Salaried and Management Employees will be entitled to purchase 16.64% of the
Equity Securities offered. The First Refusal Agreement terminates on the
Sunset. The First Refusal Agreement was amended on February 24, 1995 to clarify
that the issuance of the Debentures and the underlying Common Stock are
excluded from such right of first refusal.     
 
SERIES A PREFERRED STOCK
 
  Dividends. Holders of shares of Series A Preferred Stock are entitled to
receive, when, as and if declared by the Board of the Company out of assets of
the Company legally available therefor, cumulative cash dividends at the rate
per annum of $6.25 per share of Series A Preferred Stock. Dividends on the
Series A Preferred Stock are payable quarterly in arrears. Dividends on the
Series A Preferred Stock are cumulative. Accumulations of dividends on shares
of Series A Preferred Stock do not bear interest.
 
  Except as provided in the next sentence, no dividend may be declared or paid
on any Parity Stock (as defined below) unless full cumulative dividends have
been paid on the Series A Preferred Stock for
 
                                       50

<PAGE>
 
   
all prior dividend periods. If accrued dividends on the Series A Preferred
Stock for all prior dividend periods have not been paid in full, then any
dividend declared on the Series A Preferred Stock for any dividend period and
any dividend on any Parity Stock will be declared ratably in proportion to
accrued and unpaid dividends on the Series A Preferred Stock and such Parity
Stock.     
 
  The Company will not (i) declare, pay or set apart funds for the payment of
any dividend or other distribution with respect to any Junior Stock (as defined
below) or (ii) redeem, purchase or otherwise acquire for consideration any
Junior Stock or Parity Stock through a sinking fund or otherwise (except by
conversion into or exchange for shares of Junior Stock and other than a
redemption or purchase or other acquisition of shares of Common Stock of the
Company made for purposes of an employee incentive or benefit plan of the
Company or any subsidiary), unless all accrued and unpaid dividends with
respect to the Series A Preferred Stock and any Parity Stock at the time such
dividends are payable have been paid or funds have been set apart for payment
of such dividends.
 
  For purposes of the description of the Series A Preferred Stock, (i) the term
"dividend" does not include dividends payable solely in shares of Junior Stock
on Junior Stock, or in options, warrants or rights to holders of Junior Stock
to subscribe for or purchase any Junior Stock, (ii) the term "Parity Stock"
means any class or series of preferred stock ranking on a parity with the
Series A Preferred Stock as to payment of dividends and amounts payable upon
liquidation, dissolution or winding up, including the Series B Preferred Stock,
and (iii) the term "Junior Stock" means the Common Stock, the ESOP Preferred
Stock, the Voting Preferred Stock, the Director Preferred Stock, any shares of
Series C Preferred Stock issued pursuant to the Rights, and any other class or
series of capital stock of the Company now or hereafter issued and outstanding
that ranks junior as to the payment of dividends or amounts payable upon
liquidation, dissolution or winding up to the Series A Preferred Stock.
 
  Redemption. The Series A Preferred Stock is not redeemable prior to May 1,
1996. On and after such date, the Series A Preferred Stock is redeemable at the
option of the Company, in whole or in part, initially at $104.375 per share and
thereafter at prices declining ratably on each May 1 to $100.00 per share on
and after May 1, 2003, plus, in each case, all accrued and unpaid dividends.
Unless converted by the holders or redeemed by the Company, the Series A
Preferred Stock will have perpetual maturity.
   
  Liquidation Preference. The holders of shares of Series A Preferred Stock are
entitled to receive, in the event of any liquidation, dissolution or winding up
of the Company, $100 per share plus an amount per share equal to all dividends
(whether or not earned or declared) accrued and unpaid thereon to the date of
final distribution to such holders (for purposes of the description of the
Series A Preferred Stock, the "Liquidation Preference"), and no more.     
 
  Until the holders of the Series A Preferred Stock have been paid the
Liquidation Preference in full, no payment will be made to any holder of Junior
Stock upon the liquidation, dissolution or winding up of the Company. If, upon
any liquidation, dissolution or winding up of the Company, the assets of the
Company, or proceeds thereof, distributable among the holders of the shares of
Series A Preferred Stock are insufficient to pay in full the Liquidation
Preference and the liquidation preference with respect to any other shares of
Parity Stock, then such assets, or the proceeds thereof, will be distributed
among the holders of shares of Series A Preferred Stock and any such Parity
Stock ratably in accordance with the respective amounts which would be payable
on such shares of Series A Preferred Stock and any such Parity Stock if all
amounts payable thereon were paid in full. Neither a consolidation or merger of
the Company with another corporation nor a sale or transfer of all or
substantially all of the Company's assets will be considered a liquidation,
dissolution or winding up, voluntary or involuntary, of the Company.
 
  Voting Rights. Except as indicated below, or except as otherwise from time to
time required by applicable law, the holders of shares of Series A Preferred
Stock do not have any voting rights, and their consent is not required for
taking any corporate action. When and if the holders of the Series A Preferred
Stock are entitled to vote, each share will be entitled to one vote.
 
                                       51

<PAGE>
 
  If the equivalent of six quarterly dividends payable on the Series A
Preferred Stock or any other series of Serial Preferred Stock of the Company
have not been declared and paid or set apart for payment, whether or not
consecutive, the number of directors of the Company will be increased by two
and the holders of all such series in respect of which such a default exists,
voting as a class without regard to series, will be entitled to elect two
additional directors at the next annual meeting and each subsequent meeting,
until all cumulative dividends have been paid in full.
 
  The affirmative vote or consent of the holders of 66 2/3% of the outstanding
shares of the Series A Preferred Stock, voting separately as a class with all
other affected series of Serial Preferred Stock that is also a Parity Stock, is
required for any amendment of the Restated Certificate which alters or changes
the powers, preferences, privileges or rights of the Series A Preferred Stock
so as to materially adversely affect the holders thereof. The affirmative vote
or consent of the holders of shares representing 66 2/3% of the outstanding
shares of the Series A Preferred Stock and any other series of Parity Stock,
voting as a single class without regard to series, is required to authorize the
creation or issue of, or reclassify any authorized stock of the Company into,
or issue or authorize any obligation or security convertible into or evidencing
a right to purchase, any additional class or series of stock ranking senior to
all such series of Parity Stock.
 
  Except as required by law, the holders of Series A Preferred Stock are not
entitled to vote on any merger or consolidation involving the Company or a sale
of all or substantially all of the assets of the Company.
 
  Conversion Rights. Shares of Series A Preferred Stock are convertible in
whole or in part, at any time at the option of the holders thereof, into a
combination of cash in the amount of $54.19 and 0.3195 shares of Common Stock
(equivalent to a conversion price of $143.38 per share of Common Stock) for
each share of Series A Preferred Stock converted, subject to adjustment as set
forth in the Restated Certificate. The right to convert shares of Series A
Preferred Stock called for redemption will terminate at the close of business
on the day preceding a redemption date.
 
SERIES B PREFERRED STOCK
 
  General. The outstanding shares of Series B Preferred Stock have been
deposited under a Deposit Agreement (the "Deposit Agreement") between the
Company and First Chicago Trust Company of New York, as the Depositary (the
"Depositary"). The Company has issued receipts for fractional interests
("Depositary Shares") in the shares of Series B Preferred Stock with each
Depositary Share representing one one-thousandth of a share of Series B
Preferred Stock. Subject to the terms of the Deposit Agreement, each owner of a
Depositary Share is entitled, in proportion to the applicable interest in a
share of the Series B Preferred Stock represented by such Depositary Share, to
all of the rights and preferences of the interest in shares of Series B
Preferred Stock represented thereby (including dividend, voting, redemption and
liquidation rights).
 
  Ranking. The Series B Preferred Stock ranks on a parity with the Series A
Preferred Stock and ranks senior to the Common Stock, the ESOP Preferred Stock,
the Voting Preferred Stock, the Director Preferred Stock and any shares of
Series C Preferred Stock issued pursuant to the Rights with respect to payment
of dividends and amounts payable upon liquidation, dissolution or winding up.
 
  While any shares of Series B Preferred Stock are outstanding, the Company may
not authorize the creation or issue of any class or series of stock that ranks
senior to the Series B Preferred Stock as to dividends or upon liquidation,
dissolution or winding up without the consent of the holders of 66 2/3% of the
outstanding shares of Series B Preferred Stock. The Company may create
additional classes or series of preferred stock or authorize, or increase the
authorized amount of, any shares of any class or series of preferred stock
ranking on a parity with or junior to the Series B Preferred Stock without the
consent of any holder of Series B Preferred Stock. See "--Voting Rights" below.
 
                                       52

<PAGE>
 
  Dividends. Holders of shares of Series B Preferred Stock are entitled to
receive, when, as and if declared by the Board out of assets of the Company
legally available therefor, cumulative cash dividends at a rate of 12 1/4% of
the $25,000 liquidation preference thereof (or $3,062.50 per share) per year.
 
  Dividends on the Series B Preferred Stock are payable quarterly in arrears on
February 1, May 1, August 1 and November 1 of each year (and, in the case of
any accrued but unpaid dividends, at such additional times and for such interim
periods, if any, as determined by the Board). Each such dividend will be
payable to holders of record as they appear on the stock records of the Company
at the close of business on such record dates, which will not be more than 60
days or less than 10 days preceding the payment dates corresponding thereto, as
may be fixed by the Board or a duly authorized committee thereof. Dividends
will accrue from the date of the original issuance of the Series B Preferred
Stock (the "Series B Preferred Stock Issue Date"). Dividends will be cumulative
from such date, whether or not in any dividend period or periods there are
assets of the Company legally available for the payment of such dividends.
 
  Each share of Series B Preferred Stock issued after the Series B Preferred
Stock Issue Date (whether issued upon transfer of or in exchange for an
outstanding share of Series B Preferred Stock or issued for any other reason)
will be entitled to receive, when, as and if declared by the Board, dividends
with respect to each dividend period, starting with the Series B Preferred
Stock Issue Date, for which full dividends have not been paid prior to the date
upon which such share of Series B Preferred Stock was issued. Any share of
Series B Preferred Stock that is issued after the record date with respect to
any dividend payment and before such dividend is paid will not be entitled to
receive the dividend paid to holders of Series B Preferred Stock as of such
record date. Accumulations of dividends on shares of Series B Preferred Stock
do not bear interest.
 
  Except as provided in the next sentence, no dividend may be declared or paid
on any Parity Stock (as defined below) unless full cumulative dividends have
been paid on the Series B Preferred Stock for all prior dividend periods. If
accrued dividends on the Series B Preferred Stock for all prior dividend
periods have not been paid in full, then any dividend declared on the Series B
Preferred Stock for any dividend period and on any Parity Stock will be
declared ratably in proportion to accrued and unpaid dividends on the Series B
Preferred Stock and such Parity Stock.
 
  The Company will not (i) declare, pay or set apart funds for the payment of
any dividend or other distribution with respect to any Junior Stock (as defined
below) or (ii) redeem, purchase or otherwise acquire for consideration any
Junior Stock or Parity Stock through a sinking fund or otherwise (except by
conversion into or exchange for shares of Junior Stock and other than a
redemption or purchase or other acquisition of shares of Common Stock made for
purposes of an employee incentive or benefit plan of the Company or any
subsidiary), unless all accrued and unpaid dividends with respect to the Series
B Preferred Stock and any Parity Stock at the time such dividends or other
distributions are payable or such redemption, purchase or acquisition is to
occur have been paid or funds have been set apart for payment of such
dividends.
 
  For purposes of the description of the Series B Preferred Stock, (i) the term
"dividend" does not include dividends payable solely in shares of Junior Stock
on Junior Stock, or in options, warrants or rights to holders of Junior Stock
to subscribe for or purchase any Junior Stock, (ii) the term "Parity Stock"
means any other class or series of preferred stock ranking on a parity with the
Series B Preferred Stock as to the payment of dividends and amounts payable
upon liquidation, dissolution or winding up, including the Series A Preferred
Stock, and (iii) the term "Junior Stock" means the Common Stock, the ESOP
Preferred Stock, the Voting Preferred Stock, the Director Preferred Stock, any
shares of Series C Preferred Stock issued pursuant to the Rights and any other
class or series of capital stock of the Company now or hereafter issued and
outstanding that ranks junior as to the payment of dividends or amounts payable
upon liquidation, dissolution or winding up to the Series B Preferred Stock.
 
                                       53

<PAGE>
 
  Redemption. The Series B Preferred Stock is not redeemable prior to July 12,
2004. On and after such date, the Series B Preferred Stock is redeemable at the
option of the Company, in whole or in part, at the redemption price of $25,000
per share, plus, in each case, all dividends accrued and unpaid on the Series B
Preferred Stock up to the date fixed for redemption.
 
  Liquidation Preference. The holders of shares of Series B Preferred Stock are
entitled to receive, in the event of any liquidation, dissolution or winding up
of the Company, $25,000 per share plus an amount per share equal to all
dividends (whether or not earned or declared) accrued and unpaid thereon to the
date of final distribution to such holders (for purposes of the description of
the Series B Preferred Stock, the "Liquidation Preference"), and no more.
 
  Until the holders of the Series B Preferred Stock have been paid the
Liquidation Preference in full, no payment may be made to any holder of Junior
Stock upon the liquidation, dissolution or winding up of the Company. If, upon
any liquidation, dissolution or winding up of the Company, the assets of the
Company, or proceeds thereof, distributable among the holders of the shares of
Series B Preferred Stock are insufficient to pay in full the Liquidation
Preference and the liquidation preference with respect to any other shares of
Parity Stock, then such assets, or the proceeds thereof, will be distributed
among the holders of shares of Series B Preferred Stock and any such Parity
Stock ratably in accordance with the respective amounts that would be payable
on such shares of Series B Preferred Stock and any such Parity Stock if all
amounts payable thereon were paid in full. Neither a consolidation or merger of
the Company with another corporation nor a sale, lease or transfer of all or
substantially all of the Company's assets will be considered a liquidation,
dissolution or winding up, voluntary or involuntary, of the Company.
 
  Voting Rights. Except as indicated below, or except as otherwise from time to
time required by applicable law, the holders of shares of Series B Preferred
Stock do not have any voting rights, and their consent is not required for
taking any corporate action. When and if the holders of the Series B Preferred
Stock are entitled to vote, each share will be entitled to 1,000 votes.
 
  If the equivalent of six quarterly dividends payable on the Series B
Preferred Stock have not been declared and paid or set apart for payment,
whether or not consecutive, the number of directors of the Company will be
increased by two and the holders of all Series B Preferred Stock and any other
series of Serial Preferred Stock in respect of which such a default exists,
voting as a class without regard to series, will be entitled to elect two
additional directors at the next annual meeting and each subsequent meeting,
until all cumulative dividends have been paid in full or set apart for payment.
 
  The affirmative vote or consent of the holders of 66 2/3% of the outstanding
shares of the Series B Preferred Stock is required for any amendment of the
Restated Certificate that alters or changes the powers, preferences, privileges
or rights of the Series B Preferred Stock so as to materially adversely affect
the holders thereof. The affirmative vote or consent of the holders of shares
representing 66 2/3% of the outstanding shares of the Series B Preferred Stock
is required to authorize the creation or issue of, or reclassify any authorized
stock of the Company into, or issue or authorize any obligation or security
convertible into or evidencing a right to purchase, any additional class or
series of stock ranking senior to the Series B Preferred Stock.
 
THE ESOP PREFERRED STOCK
   
  In connection with the Recapitalization and employee investment transaction,
the Company established three ESOPs: (i) the "Leveraged ESOP," which is a
component of a tax-qualified employee stock ownership plan, (ii) the "Non-
Leveraged Qualified ESOP," which is also a component of a tax-qualified
employee stock ownership plan, and (iii) the "Supplemental ESOP," which is not
a tax-qualified plan. The Leveraged ESOP and the Non-Leveraged Qualified ESOP
are referred to as the "Qualified ESOP." To the extent reasonably possible, but
without violating certain limitations imposed by the     
 
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<PAGE>
 
Internal Revenue Code, shares will be delivered to employees through the
Leveraged ESOP. To the extent that shares cannot be delivered through the
Leveraged ESOP, they will be delivered through the Non-Leveraged Qualified
ESOP, and to the extent they cannot be delivered through the Non-Leveraged
Qualified ESOP, they will be delivered through the Supplemental ESOP.
 
  Approximately 14,000,000 shares (subject to adjustment as described below) of
Class 1 ESOP Preferred Stock will be issued in seven separate sales (the "ESOP
Tranches") to the ESOP Trustee under the Leveraged ESOP. The first ESOP Tranche
was sold to the trustee (the "ESOP Trustee") of the trust (the "Qualified
Trust") established to hold shares sold to the Leveraged ESOP and the Non-
Leveraged Qualified ESOP on July 13, 1994. The next five tranches will be sold
to the ESOP Trustee in approximately August 1995, and on the four following
anniversaries of such date. The final ESOP Tranche will be sold on the first
business day of the year 2000. The shares to be purchased in each of the first
six ESOP Tranches will generally equal the sum of (i) the shares of Class 1
ESOP Preferred Stock scheduled to be allocated to the accounts of participants
in the Leveraged ESOP for the year in which such ESOP Tranche is sold, minus
the dividends allocable to participants' accounts in such year from the shares
purchased in earlier Tranches, plus (ii) the number of shares of Class 1 ESOP
Preferred Stock equal in value to the aggregate dividends payable on the shares
purchased with the ESOP Tranche after the end of the year in which the ESOP
Tranche is purchased. The final ESOP Tranche will not include the shares
described in (ii), above, however.
   
  Because of certain limitations imposed by the Internal Revenue Code, the
Qualified Trust will not purchase the shares representing the entire equity
interest (initially 55%) represented by the ESOP Preferred Stock. Accordingly,
based on certain elections made by ALPA, the Company will allocate "phantom"
shares of Class 2 ESOP Preferred Stock (the "Book Entry Shares") under the
Supplemental ESOP. The Class 2 ESOP Preferred Stock will be issued to the
Qualified ESOP and credited to the Supplemental ESOP. Except as provided below,
these Book-Entry Shares allocated to a participant will not in fact be issued
by the Company. The number of shares of Class 2 ESOP Preferred Stock will be
equal to 17,675,345, less the number of shares of Class 1 ESOP Preferred Stock
sold to the Qualified ESOP. ALPA has the right to elect at any time that the
Supplemental ESOP be maintained by the actual issuance of Class 2 ESOP
Preferred Stock to a non-qualified trust (the "Non-Qualified Trust")
established under the Supplemental ESOP. Each year as a portion of the shares
of Class 1 ESOP Preferred Stock are allocated to employees' accounts under the
Leveraged ESOP, the same proportion of the Book-Entry Shares of Class 2 ESOP
Preferred Stock will be allocated as described below. To the extent permissible
under the Internal Revenue Code, the shares of Class 2 ESOP Preferred Stock
will be issued by the Company and transferred to the Qualified Trust for
allocation to employees' accounts under the Non-Leveraged Qualified ESOP. The
shares that cannot be transferred to the Qualified Trust will be credited as
Book-Entry Shares to the accounts of employees in the Supplemental ESOP (and if
ALPA elects that the Non-Qualified Trust will hold Class 2 ESOP Preferred
Stock, will be deposited therein). The Company will be liable for the benefits
of employees under the Supplemental ESOP.     
 
  General. The ESOP Preferred Stock consists of two similar classes of
Preferred Stock: the Class 1 ESOP Preferred Stock and the Class 2 ESOP
Preferred Stock. Where the summaries do not make a distinction between the
Class 1 ESOP Preferred Stock and the Class 2 ESOP Preferred Stock, such
summaries refer to either class.
   
  The shares of the ESOP Preferred Stock are convertible into shares of Common
Stock as described below. If all the shares of ESOP Preferred Stock to be
issued in connection with the employee investment transaction were to be
converted into shares of Common Stock, such shares of Common Stock would
constitute approximately 55% of the shares of Common Stock (including shares of
Common Stock issuable upon exercise of the ESOP Preferred Stock) that would be
outstanding at that time, on a fully diluted basis based on the treasury stock
method. If the average market value of the     
 
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<PAGE>
 
   
Common Stock exceeds $136 per share during the period of July 13, 1994 to July
12, 1995, a number of additional shares of ESOP Preferred Stock will be issued
or reserved for issuance as Book-Entry Shares. With the issuance or reservation
for issuance of such additional shares, the ownership interest of the ESOPs
could be increased from approximately 55% to up to approximately 63% of the
Company. Based on the average market value of Common Stock through February 23,
1995, the market value of the Common Stock would have to average at least $204
per share for the remainder of the measuring period in order to any adjustment
to be made in the number of shares of ESOP Preferred Stock outstanding or
reserved for issuance as Book-Entry Shares.     
   
  Ranking. The ESOP Preferred Stock ranks junior to the Series A Preferred
Stock and the Series B Preferred Stock and ranks senior to the Common Stock,
the Voting Preferred Stock, the Director Preferred Stock and any shares of
Series C Preferred Stock issued pursuant to the Rights with respect to payment
of dividends and amounts payable upon liquidation, dissolution or winding up.
The Class 1 ESOP Preferred Stock ranks senior to the Class 2 ESOP Preferred
Stock with respect to the payment of Fixed Dividends (as defined below) and the
Class 1 ESOP Preferred Stock ranks on a parity with the Class 2 ESOP Preferred
Stock as to the payment of Participating Dividends (as defined below) and as to
amounts payable upon liquidation, dissolution or winding up.     
 
  Dividends. Holders of Class 1 ESOP Preferred Stock are entitled to receive,
when, as and if declared by the Board out of assets of the Company legally
available therefor, cumulative cash dividends at a rate per annum of a dollar
amount per share of Class 1 ESOP Preferred Stock not to exceed, without the
consent of the Unions, $8.8872 (the "Fixed Dividend"). The Fixed Dividends on
the Class 1 ESOP Preferred Stock will cease to accrue on March 31, 2000. Under
certain circumstances, any Fixed Dividends that remain accrued and unpaid on
April 1, 2000 will not prevent the payment of dividends on any capital stock of
the Company that ranks junior to the Class 1 ESOP Preferred Stock with respect
to the payment of dividends, although such accrued and unpaid Fixed Dividends
will remain a part of the Liquidation Preference (as defined below) payable in
respect of the Class 1 ESOP Preferred Stock upon any liquidation, dissolution
or winding up of the Company. In addition, if during any 12-month period ending
on the annual dividend payment date, holders of the shares of Common Stock
receive any cash dividends or cash distributions thereon, and the aggregate
amount of such dividends and distributions that would have been received,
during such period, by the holder of a share of Class 1 ESOP Preferred Stock
had such share of Class 1 ESOP Preferred Stock been converted into shares of
Common Stock, exceeds the amount of the Fixed Dividend paid on such share of
Class 1 ESOP Preferred Stock, then the holders of the Class 1 ESOP Preferred
Stock will be entitled to receive an additional cash dividend in an amount
equal to such excess (the "Participating Dividend"), although the aggregate
amount of the Fixed Dividend and the Participating Dividend paid on any share
of Class 1 ESOP Preferred Stock with respect to any annual dividend period may
not exceed 12 1/2% of the fair market value of the shares of Common Stock into
which such share of Class 1 ESOP Preferred Stock is convertible.
 
  Holders of Class 2 ESOP Preferred Stock are not entitled to receive any Fixed
Dividend. If during any 12-month period ending on the annual dividend payment
date, holders of the Common Stock receive any cash dividends or cash
distributions thereon, then the holders of the Class 2 ESOP Preferred Stock
will be entitled to receive a cash dividend in an amount equal to the dividend
they would have received had their shares of Class 2 ESOP Preferred Stock been
converted into and were outstanding as Common Stock at all relevant times,
although the aggregate amount of the dividend paid on any share of Class 2 ESOP
Preferred Stock with respect to any annual dividend period may not exceed 12
1/2% of the fair market value of the shares of Common Stock into which it is
convertible.
 
  If the holders of the Common Stock receive cash dividends and cash
distributions that exceed 12 1/2% of the fair market value of such shares, such
excess will be applied to adjust the Conversion Rate (as defined below) on the
ESOP Preferred Stock.
 
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<PAGE>
 
  Except as described above, the Company will not (i) declare, pay or set apart
funds for the payment of any dividend or other distribution with respect to any
Junior Stock (as defined below) or (ii) redeem, purchase or otherwise acquire
for consideration any Junior Stock or Parity Stock (as defined below) through a
sinking fund or otherwise (except by conversion into or exchange for shares of
Junior Stock and other than a redemption or purchase or other acquisition of
shares of Common Stock made for purposes of an employee incentive or benefit
plan of the Company or any subsidiary), unless all accrued and unpaid dividends
with respect to the ESOP Preferred Stock and any Parity Stock at the time such
dividends are payable have been paid or funds have been set apart for payment
of such dividends.
 
  For purposes of the description of the ESOP Preferred Stock, (i) the term
"dividend" does not include dividends payable solely in shares of Junior Stock
on Junior Stock, or in options, warrants or rights to holders of Junior Stock
to subscribe for or purchase any Junior Stock, (ii) the term "Parity Stock"
means any class or series of preferred stock ranking on a parity with the ESOP
Preferred Stock as to payment of dividends (with respect to such dividends) or
amounts payable upon liquidation, dissolution or winding up (with respect to
such amounts) and (iii) the term "Junior Stock" means the Common Stock, the
Voting Preferred Stock, the Director Preferred Stock, any shares of Series C
Preferred Stock issued pursuant to the Rights and any other class or series of
capital stock of the Company now or hereafter issued and outstanding that ranks
junior as to the payment of dividends (with respect to such dividends) or
amounts payable upon liquidation, dissolution or winding up (with respect to
such amounts) to the ESOP Preferred Stock.
   
  Conversion. The ESOP Preferred Stock is convertible, in whole or in part, at
any time and from time to time, into shares of Common Stock initially at the
rate (for purposes of the description of ESOP Preferred Stock, the "Conversion
Rate") of one share of Common Stock for each share of ESOP Preferred Stock
converted. In addition, the Conversion Rate on the ESOP Preferred Stock will be
adjusted upon the occurrence of a variety of events, including, without
limitation, a distribution of capital stock to holders of shares of Common
Stock, a subdivision, recombination or reclassification of the Common Stock,
the issuance to holders of Common Stock of rights to subscribe for equity
securities at a price per share of Common Stock that is less than the fair
market value of a share of Common Stock, the issuance of Common Stock or
securities representing a right to acquire shares of Common Stock at a price
per share that is less than the fair market value of a share of Common Stock,
the payment of cash dividends and cash distributions to holders of Common Stock
(measured from the later of (i) the date that shares of Class 2 ESOP Preferred
Stock are first issued and (ii) the most recent dividend payment date for the
Class 2 ESOP Preferred Stock, through the payment date for such cash dividend
or cash distribution) that exceed in the aggregate 12 1/2% of the fair market
value of the Common Stock on the record date for such cash dividend or cash
distribution, the payment of any non-cash dividend or distribution to holders
of Common Stock and certain Pro Rata Repurchases of Common Stock.     
 
  Redemption. The ESOP Preferred Stock is not redeemable.
 
  Liquidation Preference. The holders of shares of ESOP Preferred Stock are
entitled to receive, in the event of any liquidation, dissolution or winding up
of the Company, $126.96 per share, plus an amount per share equal to all
dividends (whether or not earned or declared) accrued and unpaid thereon to the
date of final distribution to such holders, including, without limitation,
Fixed Dividends in respect of the Class 1 ESOP Preferred Stock that are accrued
and unpaid as of April 1, 2000 (but that will not prevent the payment of
dividends on any capital stock of the Company that ranks junior to the Class 1
ESOP Preferred Stock with respect to the payment of dividends) (for purposes of
the description of the ESOP Preferred Stock, the "Liquidation Preference"), and
no more.
 
  Until the holders of the ESOP Preferred Stock have been paid the Liquidation
Preference in full, no payment may be made to any holder of Junior Stock upon
the liquidation, dissolution or winding up of the Company. If, upon any
liquidation, dissolution or winding up of the Company, the assets of the
 
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<PAGE>
 
Company, or proceeds thereof, distributable among the holders of the shares of
ESOP Preferred Stock are insufficient to pay in full the Liquidation Preference
and the liquidation preference with respect to any other shares of Parity
Stock, then such assets, or the proceeds thereof, will be distributed among the
holders of shares of ESOP Preferred Stock and any such Parity Stock ratably in
accordance with the respective amounts that would be payable on such shares of
ESOP Preferred Stock and any such Parity Stock if all amounts payable thereon
were paid in full. Neither a consolidation or merger of the Company with
another corporation nor a sale, lease or transfer of all or substantially all
of the Company's assets will be considered a liquidation, dissolution or
winding up, voluntary or involuntary, of the Company.
 
  Voting Rights. Except as indicated below, and except as otherwise from time
to time required by applicable law, the holders of shares of ESOP Preferred
Stock do not have any voting rights, and their consent is not required for
taking any corporate action. When and if the holders of ESOP Preferred Stock
are entitled to vote, each share will be entitled to one vote.
   
  The affirmative vote or consent of at least a majority of the holders of the
outstanding shares of the Class 1 ESOP Preferred Stock or the Class 2 ESOP
Preferred Stock, as the case may be, voting separately as a class, is required
for any amendment of the Restated Certificate which alters or changes the
powers, preferences, privileges or rights of the Class 1 ESOP Preferred Stock
or the Class 2 ESOP Preferred Stock, as the case may be, so as to materially
adversely affect the holders thereof. The affirmative vote or consent of the
holders of at least a majority of the outstanding shares of the Class 1 ESOP
Preferred Stock or the Class 2 ESOP Preferred Stock, as the case may be, voting
separately as a class, is required to authorize the creation or issue of, or
reclassify any authorized stock of the Company into, or issue or authorize any
obligation or security convertible into or evidencing a right to purchase, any
additional class or series of stock ranking senior to such stock.     
 
  Consolidation, Merger, etc. Upon the occurrence of certain mergers and other
similar transactions, the holders of the ESOP Preferred Stock are entitled to
receive, depending on the circumstances, either (i) a preferred stock having
the same powers, preference and relative, participating, optional or other
special rights as the class of ESOP Preferred Stock they held prior to such
merger or other transaction or (ii) the consideration receivable by the holders
of the number of shares of Common Stock into which such shares of ESOP
Preferred Stock could have been converted immediately prior to such merger or
other transaction.
 
THE VOTING PREFERRED STOCK
   
  General. The Voting Preferred Stock consists of three similar classes of
Preferred Stock of the Company: the Class P ESOP Voting Preferred Stock, which
will be allocated to ESOP accounts of employees represented by ALPA, the Class
M ESOP Voting Preferred Stock, which will be allocated to ESOP accounts of
employees represented by the IAM, and the Class S ESOP Voting Junior Preferred
Stock, which will be allocated to Salaried and Management Employees' accounts.
Where the following summaries do not make a distinction among the Class M ESOP
Voting Preferred Stock, the Class P ESOP Voting Preferred Stock and the Class S
ESOP Voting Preferred Stock, such summaries refer to any such class.     
 
  One share of Class P ESOP Voting Preferred Stock, one share of Class M ESOP
Voting Preferred Stock and one share of Class S ESOP Voting Preferred Stock
have been issued to the ESOP Trustee.
 
  Voting Rights. The Voting Preferred Stock votes with the holders of the
Common Stock and the Director Preferred Stock as a single class on all matters
(except as to such matters as to which a separate class vote may be required by
the DGCL), except that until the Sunset, holders of the Voting Preferred Stock
are not entitled to vote to elect members of the Board. Until the Sunset, the
Voting Preferred Stock represents the right to cast in the aggregate
approximately 55% of the votes of all
 
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<PAGE>
 
   
classes of capital stock that vote together with the Common Stock as a single
class (other than for the election of members to the Board), subject to
reduction for the number of shares of Common Stock that have been issued upon
conversion of shares of the ESOP Preferred Stock that continue to be held by
the ESOP. If the average market value of the Common Stock exceeds $136 per
share during the period of July 13, 1994 to July 12, 1995, the number of votes
represented by the Voting Preferred Stock will be increased above approximately
55% of the votes represented by the shares of Common Stock (including shares of
Common Stock issuable upon conversion of the ESOP Preferred Stock that would be
outstanding or reserved for issuance as Book-Entry Shares or remaining to be
transferred to the ESOPs) to up to a maximum of approximately 63%. Based on the
average market value of Common Stock through February 23, 1995, the market
value of the Common Stock would have to average at least $204 per share for the
remainder of the measuring period in order for any adjustment to be made in the
ESOP voting percentage.     
   
  The voting power of the Voting Preferred Stock is held such that the Class P
ESOP Voting Preferred Stock is entitled to cast approximately 46.23% of the
votes represented by the Voting Preferred Stock, the Class M ESOP Voting
Preferred Stock is entitled to cast approximately 37.13% of the votes
represented by the Voting Preferred Stock and the Class S ESOP Voting Preferred
Stock is entitled to cast approximately 16.64% of the votes represented by the
Voting Preferred Stock. Such percentages are referred to as the "Agreed
Percentages."     
 
  After the Sunset, each class of Voting Preferred Stock will represent the
right to cast in the aggregate the number of votes that is equal to the
relevant Agreed Percentage of the number of shares of Common Stock into which
the ESOP Preferred Stock can be converted plus the number of Book-Entry Shares
remaining to be issued plus the number of shares of ESOP Preferred Stock, if
any, remaining to be transferred to the ESOP.
 
  Other. The Voting Preferred Stock is not entitled to receive any dividends.
The Voting Preferred Stock is convertible into shares of Common Stock at the
rate of one ten-thousandth of a share of Common Stock for each share of Voting
Preferred Stock converted. All the Voting Preferred Stock will be converted
into shares of Common Stock automatically upon the occurrence of an
Uninstructed Trustee Action (as defined below) or at such time when none of the
ESOP Preferred Stock remains outstanding. The Voting Preferred Stock has a
liquidation preference of $0.01 per share.
   
  Upon the occurrence of certain mergers and other similar transactions, the
holders of the Voting Preferred Stock are entitled to receive a preferred stock
having the same powers, preference and relative, participating, optional or
other special rights as the class of Voting Preferred Stock they held prior to
such merger or other transaction except that such preferred stock will not
control 55% of the vote of the surviving entity.     
 
THE DIRECTOR PREFERRED STOCK
 
 General
 
  The Director Preferred Stock consists of four classes of Preferred Stock: the
Class I Preferred Stock, the Class Pilot MEC Preferred Stock, the Class IAM
Preferred Stock and the Class SAM Preferred Stock. Where the summaries do not
make a distinction among the several classes of Director Preferred Stock, such
summaries refer to any of them.
 
  Each of the classes of Director Preferred Stock has the power to elect one or
more members of the Board. Except for the election of the Public Directors on
which the holders of the Director Preferred Stock cannot vote, and except as
otherwise from time to time required by applicable law, the holders of the
shares of Director Preferred Stock vote together as a class with the holders of
the Common Stock. None of the classes of Director Preferred Stock bear
dividends. Each class of Director Preferred Stock has a liquidation preference
of $0.01 per share.
 
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<PAGE>
 
  Each of the Class Pilot MEC Preferred Stock, the Class IAM Preferred Stock
and the Class SAM Preferred Stock provides that upon the consolidation, merger
or similar transaction involving the Company or United, pursuant to which the
outstanding shares of Common Stock are to be exchanged for or converted into
securities of a successor or resulting company or cash or other property, the
Class Pilot MEC Preferred Stock, the Class IAM Preferred Stock and the Class
SAM Preferred Stock, respectively, will be converted into, or exchanged for,
preferred stock of such successor or resulting company having, in respect of
such company, the same powers, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, that the original Class Pilot MEC Preferred Stock, Class
IAM Preferred Stock and Class SAM Preferred Stock had, respectively.
 
 Class I Preferred Stock
 
  The Class I Preferred Stock has been issued to the Independent Directors. The
Restated Certificate authorizes the issuance of ten shares of Class I Preferred
Stock, although the Company expects that no more than four shares will be
outstanding at any time.
 
  The initial holders of the Class I Preferred Stock have entered into a
Stockholders' Agreement among themselves, ALPA, the IAM and the Company (the
"Class I Preferred Stockholders' Agreement"), pursuant to which the holders
agree to vote their shares to elect the Independent Directors nominated
pursuant to the provisions described above and to refrain from transferring the
shares of Class I Preferred Stock other than to a person who has been elected
to serve as one of the Independent Directors and who agrees to be subject to
the provisions of the Class I Preferred Stockholders' Agreement. The Restated
Certificate and the Class I Preferred Stockholders' Agreement provide that the
Company, subject to legally available funds, will redeem or purchase the shares
of Class I Preferred Stock held by any holder thereof who votes contrary to the
Class I Preferred Stockholder's Agreement or who purports to transfer the share
of Class I Preferred Stock to any person other than an Independent Director.
Any share of Class I Preferred Stock redeemed or purchased as provided in the
immediately prior sentence may be reissued as provided in the Restated
Certificate or the Class I Preferred Stockholders' Agreement. All shares of the
Class I Preferred Stock will be redeemed automatically upon the occurrence of
the Sunset, and following such redemption, none of the shares of Class I
Preferred Stock may be reissued thereafter.
 
 Class Pilot MEC Preferred Stock and Class IAM Preferred Stock
 
  The Restated Certificate authorizes the issuance of one share of each of the
Class Pilot MEC Preferred Stock and the Class IAM Preferred Stock. The share of
the Class Pilot MEC Preferred Stock has been issued to the ALPA MEC and the
share of Class IAM Preferred Stock has been issued to the IAM. Each of the
Class Pilot MEC Preferred Stock and the Class IAM Preferred Stock has the right
to elect one Employee Director, and the shares of such stock will be redeemed
automatically upon the purported transfer thereof to any person other than the
holder thereof authorized under the Restated Certificate. The Class Pilot MEC
Preferred Stock will be redeemed automatically upon the later of the Sunset or
the occurrence of the ALPA Termination Date. The Class IAM Preferred Stock will
be redeemed automatically upon the later of the Sunset or the occurrence of the
IAM Termination Date.
 
 Class SAM Preferred Stock
 
  The Restated Certificate authorizes the issuance of ten shares of Class SAM
Preferred Stock, although the Company expects that no more than three shares
will be outstanding at any time. Two shares of Class SAM Preferred Stock are
held by the Salaried and Management Director and one share is held by the SAM
Designated Shareholder.
 
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<PAGE>
 
  The initial holders of the Class SAM Preferred Stock have entered into a
Stockholders' Agreement among themselves and the Company (the "Class SAM
Preferred Stockholders' Agreement"), pursuant to which the holders agree to
vote their shares to elect the Salaried and Management Director nominated by
the System Roundtable, and to refrain from transferring the shares of Class SAM
Preferred Stock other than to a person who has been elected to serve as the
Salaried and Management Director or another person designated by the System
Roundtable to be the Designated Holder, each of whom must agree to be subject
to the provisions of the Class SAM Preferred Stockholders' Agreement. The Class
SAM Preferred Stockholders' Agreement provides that in most instances the
Designated Holder will be the senior executive of United who has primary
responsibility for human resources. The Restated Certificate and the Class SAM
Preferred Stockholders' Agreement provide that the Company, subject to legally
available funds, will redeem or purchase the shares of Class SAM Preferred
Stock of any holder who votes contrary to the instructions given by the System
Roundtable or who purports to transfer the share or shares of Class SAM
Preferred Stock to any person other than the Salaried and Management Director
or another person designated by the System Roundtable. The Restated Certificate
provides that no holder of shares of Class SAM Preferred Stock will have the
right to vote unless at such time such person is the Salaried and Management
Director or the Designated Holder. Any share of Class SAM Preferred Stock that
is redeemed or purchased as provided in the immediately prior sentence may be
reissued as provided in the Restated Certificate and the Class SAM Preferred
Stockholders' Agreement. All shares of the Class SAM Preferred Stock will be
redeemed automatically on or after the Sunset upon the earlier to occur of the
ALPA Termination Date and the IAM Termination Date, and following such
redemption, none of the shares of Class SAM Preferred Stock may be reissued.
 
 Uninstructed Trustee Actions
 
  Under certain circumstances prior to the Sunset, described below, (i) the
Voting Preferred Stock will cease to vote and (ii) the right to cast the votes
that the holder of the Voting Preferred Stock would otherwise have been
entitled to cast will be transferred generally in the following percentages:
46.23% to the holder of the Class Pilot MEC Preferred Stock, 37.13% to the
holder of the Class IAM Preferred Stock and 16.64% to the holders of the Class
SAM Preferred Stock.
   
  In connection with (i) a stockholder vote on a transaction involving a merger
of the Company or United or a change of control of the Company or United, or
(ii) if the trustee under either ESOP enters into a binding commitment with
respect to any such transaction, or (iii) if the trustee disposes of 10% or
more of the common equity initially represented by the ESOP Preferred Stock,
(x) if the trustee either (1) fails to solicit timely instructions from the
Plan participants or the Committees or (2) fails to act in accordance with the
instructions received, (y) if the merger or change of control transaction would
have been approved or if the trustee disposes of 10% or more of the common
equity initially represented by the ESOP Preferred Stock and (z)(I) the trustee
solicited instructions, failed to follow them and such transaction would not
have been approved if the trustee had followed the instructions, (II) the
trustee failed to follow instructions and the transaction would not have been
approved had the trustee cast all the votes represented by securities in the
Plan against the transaction or (III) the trustee failed to follow instructions
or to solicit instructions with respect to a matter upon which no vote is
required (the occurrence of the conditions set forth in clauses (x), (y) and
(z) being referred to as an "Uninstructed Trustee Action"), the voting rights
of the Voting Preferred Stock will be transferred from the Voting Preferred
Stock to the Class Pilot MEC Preferred Stock, the Class IAM Preferred Stock and
the Class SAM Preferred Stock in the proportions referred to above. In
addition, if the trustee fails to solicit instructions or disregards
instructions received in respect of a vote on a transaction which, if
consummated, would constitute an Uninstructed Trustee Action, then the voting
power of the Voting Preferred Stock will shift to the Class Pilot MEC Preferred
Stock, the Class IAM Preferred Stock and the Class SAM Preferred Stock and the
transaction must be approved by the vote of the Class Pilot MEC Preferred
Stock, the Class IAM Preferred Stock and the Class SAM Preferred Stock voting
together as a class with the Common Stock, in addition to any other vote
required by the Restated Certificate, stock exchange requirements or applicable
law.     
 
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<PAGE>
 
  In addition, if the Sunset occurs directly or indirectly as a result of an
Uninstructed Trustee Action (or for any reason within one year after an
Uninstructed Trustee Action), the voting power to which the Class Pilot MEC
Preferred Stock, the Class IAM Preferred Stock and the Class SAM Preferred
Stock succeed as a result of an Uninstructed Trustee Action will survive until
July 12, 2010.
 
SERIES C PREFERRED STOCK
 
  General. The Company has designated 1,250,000 shares of a series of Serial
Preferred Stock as Series C Preferred Stock and such shares are reserved for
issuance upon exercise of the Rights associated with each share of Common
Stock. See "--Preferred Share Purchase Rights" below. As of the date of this
Prospectus, there are no shares of Series C Preferred Stock outstanding.
 
  Ranking. The Series C Preferred Stock ranks junior to all other series of
preferred stock as to dividends and amounts payable upon any voluntary or
involuntary liquidation, dissolution or winding up of the Company unless the
terms of any such other series shall provide otherwise.
 
  Dividends. Holders of shares of Series C Preferred Stock will be entitled to
receive, when, as and if declared by the Board out of funds legally available
therefor, cumulative cash dividends payable quarterly on the fifteenth day of
January, April, July and October in each year (each such date being a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series C Preferred Stock, in an amount per share equal to the greater of (a)
$10.00 or (b) subject to certain provisions for adjustment set forth in the
Restated Certificate, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of common stock or a subdivision of the outstanding shares of common
stock since the immediately preceding Quarterly Dividend Payment Date or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series C Preferred Stock.
 
  The Company must declare a dividend or distribution on the Series C Preferred
Stock immediately after it declares a dividend or distribution on common stock
(other than a dividend payable in shares of common stock), provided that in the
event no dividend or distribution has been declared on common stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $10.00 per share on the Series C
Preferred Stock will nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
 
  The Restated Certificate sets forth certain restrictions imposed upon the
Company whenever quarterly dividends or other distributions payable on Series C
Preferred Stock are in arrears, including, but not limited to, restrictions on
the Company's ability to declare or pay dividends on, make any other
distributions on, redeem or purchase or otherwise acquire for consideration
shares ranking junior to or on a parity with the Series C Preferred Stock
either as to dividends or amounts payable upon liquidation, dissolution or
winding up of the Company.
 
  Redemption. When issued and outstanding, the shares of Series C Preferred
Stock will not be redeemable.
 
  Liquidation Preference. Subject to (a) the rights of holders of preferred
stock of the Company ranking senior to Series C Preferred Stock as to dividends
and amounts payable upon any voluntary or involuntary liquidation, dissolution
or winding up and (b) any other provision of the Restated Certificate, upon any
voluntary or involuntary liquidation, dissolution or winding up of the Company,
no distribution shall be made (1) to the holders of shares of stock ranking
junior (either as to dividends or amounts payable upon any voluntary or
involuntary liquidation, dissolution or winding up) to the Series C Preferred
Stock unless, prior thereto, the holders of shares of Series C Preferred Stock
will have
 
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<PAGE>
 
received $100.00 per share, plus accrued and unpaid dividends to the date of
such payment, provided that the holders of shares of Series C Preferred Stock
will be entitled to receive an aggregate amount per share, subject to certain
provisions for adjustment set forth in the Restated Certificate, equal to 100
times the aggregate amount to be distributed per share to holders of common
stock, or (2) to the holders of stock ranking on a parity (either as to
dividends or amounts payable upon any voluntary or involuntary liquidation,
dissolution or winding up) with the Series C Preferred Stock, except
distributions made ratably on Series C Preferred Stock and all other such
parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such voluntary or involuntary liquidation,
dissolution or winding up.
 
  Voting Rights. Except as indicated below or as expressly required by
applicable law, the holders of Series C Preferred Stock will not have voting
rights.
   
  Subject to certain provisions for adjustment set forth in the Restated
Certificate, each share of Series C Preferred Stock will entitle the holder
thereof to 100 votes on all matters submitted to a vote of the stockholders of
the Company. Except as indicated below or expressly required by applicable law,
the holders of Series C Preferred Stock and the holders of shares of Common
Stock will vote together as one class on all matters submitted to a vote of
stockholders of the Company.     
 
  If the equivalent of six quarterly dividends payable on the Series C
Preferred Stock or any other series of Serial Preferred Stock of the Company
have not been declared and paid or set aside for payment, whether or not
consecutive, the number of directors of the Company will be increased by two
and the holders of all such series in respect of which such a default exists,
voting as a class without regard to series, will be entitled to elect two
additional directors at the next annual meeting and each subsequent meeting,
until all cumulative dividends have been paid in full or until noncumulative
dividends have been paid regularly for at least a year.
 
  Consolidation, Merger, Etc. In the event of any consolidation, merger,
combination or other transaction in which shares of common stock are exchanged
for or changed into other stock, securities, cash or other property, each share
of Series C Preferred Stock shall be similarly exchanged or changed in an
amount per share equal to 100 times the aggregate amount of stock, securities,
cash or other property, as the case may be, for or into which each share of
common stock is exchanged or changed.
 
PREFERRED SHARE PURCHASE RIGHTS
 
  A right (a "Right") is associated with, and trades with, each share of Common
Stock outstanding. As long as the Rights are associated with the shares of
Common Stock, each newly issued share of Common Stock issued by the Company,
including shares of Common Stock into which the ESOP Preferred Stock and the
Series A Preferred Stock are convertible, will include one Right. The Rights
Agreement provides that a Right will be associated with each share of ESOP
Preferred Stock outstanding and each Authorized Unissued ESOP Share. Each Right
will entitle its holder to purchase one one-hundredth of a share of Series C
Preferred Stock for $185 (subject to adjustment). Subject to amendment, the
Rights are not exercisable until 10 business days after any person or group
announces its beneficial ownership of 15% or more of the Common Stock. The
Rights Agreement provides that the transactions associated with the
Recapitalization will not cause the Rights to become exercisable as a result
thereof.
 
  If any person or group acquires 15% or more of the Common Stock outstanding
(other than the ESOP Trustee, ALPA, the IAM and the beneficial owners of Common
Stock eligible to report and reporting on Schedule 13G under the Exchange Act),
each Right holder (except the acquiring party) has the right to receive, upon
exercise, shares of Common Stock (or, under certain circumstances, cash,
property or other Company securities) having a market value of three times the
exercise price of the Right. If, after the Rights become exercisable, the
Company is involved in a merger where it does
 
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<PAGE>
 
not survive or survives with a change or exchange of its Common Stock or the
Company sells or transfers more than 50% of its assets or earning power, each
Right will be exercisable for common stock of the other party to such
transaction having a market value of three times the exercise price of the
Right. The Company has the right to redeem the Rights for $.05 per Right prior
to the time that they become exercisable. The Rights will expire on December
31, 1996.
 
  The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Board, except pursuant to an offer conditioned on
a substantial number of Rights being acquired. The Rights should not interfere
with any merger or other business combination approved by the Board since the
Rights may be redeemed or their terms amended by the Company as described
above.
 
                   CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
   
  The following is a general summary of the material United States federal
income tax considerations relevant to an exchange of Series A Preferred Stock
for Debentures and the ownership, disposition and conversion of Debentures by
persons acquiring Debentures pursuant to the Exchange Offer. To the extent it
relates to matters of law or legal conclusions, this summary constitutes the
opinion of Mayer, Brown & Platt, special counsel to the Company. This summary
is based on the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury Regulations (including Proposed Regulations and Temporary Regulations)
promulgated thereunder, Internal Revenue Service ("IRS") rulings, official
pronouncements and judicial decisions, all as in effect on the date hereof and
all of which are subject to change, possibly with retroactive effect, or
different interpretations. This summary is applicable only to holders who are
United States persons for federal income tax purposes and who hold Series A
Preferred Stock as a capital asset and who will hold Debentures and any Common
Stock received on conversion of Debentures as capital assets. For a discussion
of certain material United States federal income and estate tax considerations
that may be relevant to non-United States persons, see "Certain Federal Tax
Considerations for Non-United States Persons."     
 
  This summary does not discuss all the tax consequences that may be relevant
to a particular holder in light of the holder's particular circumstances and it
is not intended to be applicable in all respects to all categories of
investors, some of whom--such as insurance companies, tax-exempt persons,
financial institutions, regulated investment companies, dealers in securities
or currencies, persons that hold Series A Preferred Stock or the Debentures
received in the exchange as a position in a "straddle," as part of a "synthetic
security," "hedge," "conversion transaction" or other integrated investment or
persons whose functional currency is other than United States dollars--may be
subject to different rules not discussed below. In addition, this summary does
not address any state, local or foreign tax considerations that may be relevant
to a holder's decision to exchange Series A Preferred Stock for Debentures
pursuant to the Exchange Offer.
          
  ALL SERIES A PREFERRED STOCK HOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
THE EXCHANGE OF SERIES A PREFERRED STOCK FOR DEBENTURES AND OF THE OWNERSHIP,
CONVERSION AND DISPOSITION OF DEBENTURES RECEIVED IN THE EXCHANGE OFFER IN
LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.     
 
EXCHANGE OF SERIES A PREFERRED STOCK FOR DEBENTURES
 
  The exchange of Series A Preferred Stock for Debentures pursuant to the
Exchange Offer will be a taxable event. If, with respect to a particular
holder, such exchange satisfies one of the tests of section 302 of the Code
described below, it will be treated as a transaction in which capital gain or
loss is recognized, rather than as a dividend. The tests under section 302 of
the Code are applied on a
 
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<PAGE>
 
stockholder-by-stockholder basis; therefore, whether an exchange will be
treated as a transaction in which capital gain or loss is recognized or as a
dividend with respect to a particular holder will depend on that holder's
particular facts and circumstances. If the exchange of Series A Preferred Stock
for Debentures is treated as a transaction in which capital gain or loss is
recognized with respect to a particular holder, the capital gain or loss will
be based on the difference between the fair market value of the Debentures
received in the exchange and such holder's adjusted tax basis in the Series A
Preferred Stock surrendered therefor. Such capital gain or loss will be long-
term capital gain or loss if the Series A Preferred Stock surrendered in the
exchange was held by such holder for more than one year. The exchanging
holder's tax basis in the Debentures received in the exchange will equal the
fair market value of such Debentures at the time of the exchange and the
holding period for such Debentures will begin on the day after the day on which
the Debentures are acquired by such holder.
   
  Pursuant to section 302 of the Code, an exchange will be treated as a
transaction in which gain or loss is recognized if, after giving effect to the
constructive ownership rules of section 318 of the Code, the exchange (i)
represents a "complete termination" of the exchanging holder's stock interest
in the Company, (ii) is "substantially disproportionate" with respect to the
exchanging holder or (iii) is "not essentially equivalent to a dividend" with
respect to the exchanging holder, all within the meaning of section 302(b) of
the Code. Under the constructive ownership rules of section 318 of the Code, a
holder of a Debenture will be treated as owning the Common Stock into which
such Debenture is convertible. Accordingly, an exchange pursuant to the
Exchange Offer could not, standing alone, satisfy the "complete termination" or
the "substantially disproportionate" tests. An exchange will be "not
essentially equivalent to a dividend" as to a particular holder if it results
in a "meaningful reduction" in such holder's interest in the Company (after
application of the constructive ownership rules of section 318 of the Code). In
general, there are no fixed rules for determining whether a "meaningful
reduction" has occurred. However, based upon published rulings of the Internal
Revenue Service, the exchange will be treated as a transaction in which gain or
loss is recognized if the holder's stock ownership (treating the Debentures as
converted) is minimal, the holder exercises no control over the affairs of the
Company, and the holder's percentage equity interest in the Company is reduced
in the redemption to any extent. Because the conversion price of a Debenture is
higher than that of the equivalent amount of Series A Preferred Stock to be
surrendered therefor, an exchange of Series A Preferred Stock for Debentures
would, standing alone, result in some reduction in an exchanging holder's
constructive stock interest in the Company. No assurance can be given that
these tests will be satisfied. EACH HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR
AS TO ITS ABILITY TO SATISFY ANY OF THE FOREGOING TESTS, POSSIBLY BY DISPOSING
OF A PORTION OF ITS STOCK INTEREST IN THE COMPANY CONTEMPORANEOUSLY, AND AS
PART OF AN INTEGRATED PLAN, WITH THE EXCHANGE OF SERIES A PREFERRED STOCK FOR
DEBENTURES, IN LIGHT OF ITS OWN PARTICULAR CIRCUMSTANCES.     
 
  If an exchange is treated as a dividend with respect to a particular
exchanging holder under section 302 of the Code, such holder (i) will not
recognize any loss on the exchange and (ii) will recognize dividend income
(rather than capital gain) in an amount equal to the fair market value of the
Debentures (and any cash in lieu of fractional Debentures) received (without
regard to such holder's basis in the Series A Preferred Stock surrendered in
the exchange), to the extent of its proportionate share of the Company's
current or accumulated earnings and profits. If the fair market value of the
Debentures (and any cash in lieu of fractional Debentures) received exceeds the
holder's proportionate share of the Company's current and accumulated earnings
and profits, the excess will be treated as a nontaxable recovery of the
holder's basis in any remaining Series A Preferred Stock held by such holder
or, if such holder does not retain any Series A Preferred Stock, to any Common
Stock held by such holder, with any remaining excess treated as gain from the
sale or exchange of such stock. Such holder's tax basis in the Debentures
generally will equal the fair market value of such Debentures at the time of
the exchange (without regard to such holder's basis in the Series A Preferred
Stock surrendered in the exchange). The holder's adjusted tax basis in its
Series A Preferred Stock surrendered in the exchange
 
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<PAGE>
 
will be transferred to any remaining Series A Preferred Stock held by such
holder or, if such holder does not retain any Series A Preferred Stock, to any
Common Stock held by such holder. If the holder does not retain any stock
ownership in the Company, it is unclear whether the holder will be permitted to
add such basis to any Debentures received in the exchange or will lose such
basis entirely. To the extent the distribution is taxable as a dividend to a
corporate stockholder, (i) it will be eligible for a dividend received
deduction (subject to the minimum holding period requirements under section
246(c) of the Code and other applicable limitations) and (ii) it may be subject
to the "extraordinary dividend" provisions of the Code which, if applicable,
would require a corporate shareholder to reduce its tax basis (and possibly
recognize gain) in any stock of the Company held by it by the nontaxed portion
of any such dividend. The holding period for the Debentures will begin on the
day after the day on which the Debentures are acquired by the exchanging
holder.
 
INTEREST AND ORIGINAL ISSUE DISCOUNT ON DEBENTURES
 
  In accordance with sections 1271 through 1275 of the Code and the final
Treasury Regulations promulgated thereunder (the "OID Regulations"), a debt
instrument bears original issue discount ("OID") if its "stated redemption
price at maturity" exceeds its "issue price" by more than a de minimis amount.
The issue price of the Debentures will be their fair market value at the time
of the exchange. The stated redemption price at maturity of a debt instrument
generally includes all amounts payable other than "qualified stated interest"
(i.e., payments that are unconditionally required to be paid at least annually
at a single fixed rate over the term of the instrument). Because the Company
has the right to elect to extend the interest payment period to a period of up
to 20 consecutive quarterly periods, none of the payments of stated interest on
the Debentures will be qualified stated interest. Thus, the Debentures will
have OID in an amount equal to the excess of all payments required to be made
under the Debentures over their issue price. A holder will be required to
include OID in income, based on a constant yield method, before the receipt of
cash attributable to such income, regardless of such holder's regular method of
accounting. As a result, during any period in which the Company has elected to
extend the interest payment period a holder generally would be required to
include OID in income but would not receive cash from the Company sufficient to
pay tax thereon. A holder will not recognize any income upon the receipt of a
payment of stated interest on a Debenture; instead, a holder's basis in the
Debentures will be increased by the amount of OID includible in income and
reduced by all payments made on the Debentures.
 
  The amount of OID includible in income is the sum of the daily portions of
OID with respect to such Debenture for each day during the taxable year on
which such holder held such Debenture. The daily portion of OID on a Debenture
is determined by allocating to each day in any "accrual period" a ratable
portion of the OID allocable to such accrual period. The term "accrual period"
means a period of any length selected by the holder, provided that each accrual
period must be no longer than one year and each scheduled payment date of
principal or interest on a Debenture must occur either on the final day of an
accrual period or the first day of an accrual period. The amount of OID
allocable to an accrual period is the product of the "adjusted issue price" at
the beginning of the accrual period and the "yield to maturity" of the
Debenture. For the first accrual period, the adjusted issue price of the
Debentures will be their issue price. Thereafter, the adjusted issue price of a
Debenture generally will be its issue price increased by any OID previously
includible in the gross income of the holder and decreased by any payment
previously made on the Debenture.
 
  Under the OID Regulations, in computing the yield to maturity of an
instrument the issuer is deemed to elect to exercise any option available to it
under the instrument if doing so will minimize the yield on the instrument. If
the issuer does not exercise such option, then, solely for purposes of the
accrual of OID, the yield and maturity of the instrument are redetermined by
treating the instrument as reissued for an amount equal to its adjusted issue
price. Thus, for example, in the case of the first accrual period with respect
to the Debentures, the OID Regulations require that the yield to maturity of
the Debentures
 
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<PAGE>
 
be computed assuming that the Company would elect to extend the interest
payment period to the maximum 20 consecutive quarters (because doing so would
minimize the yield on the Debentures). Assuming quarterly accrual periods, the
aggregate amount of OID for the first quarterly accrual period would equal the
product of the issue price and the yield to maturity (as so determined). If,
contrary to this assumption under the OID Regulations, the Company does not
elect to extend the interest payment period and pays the stated interest at the
end of the first quarterly interest payment period, the instrument will be
treated, solely for OID purposes, as having been reissued on such payment date.
The yield to maturity would then be recomputed, again assuming that the Company
would elect to extend the interest payment period to the maximum 20 consecutive
quarters (again, because doing so would minimize the yield on the Debentures).
The amount of OID for this second accrual period would equal the product of
such recomputed yield to maturity and the adjusted issue price on the date of
such deemed reissuance (i.e., the issue price plus the amount of previously
accrued OID minus the interest previously paid on the Debentures). In the case
of the final accrual period, the allocable OID is the difference between the
amount payable at maturity and the adjusted issue price at the beginning of the
accrual period.
 
  If an exchange of Series A Preferred Stock for Debentures is treated as a
dividend to the exchanging holder (see "--Exchange of Series A Preferred Stock
for Debentures," above), and the exchanging holder's basis in the Series A
Preferred Stock surrendered in the exchange is transferred to the Debentures,
such holder may have acquisition premium with respect to the Debentures, which
would reduce the amount includible in such holder's income as OID in each
taxable year.
 
SALE OR REDEMPTION OF DEBENTURES
 
  Generally, a sale or redemption of Debentures will result in taxable gain or
loss equal to the difference between the amount realized and the holder's tax
basis in the Debentures. Such gain or loss would be long-term capital gain or
loss if the Debentures were held for more than one year.
 
CONVERSION OF DEBENTURES
 
  The conversion of Debentures into Common Stock and cash will likely be
treated as a recapitalization within the meaning of Section 368(a)(1)(E) of the
Code. If the conversion so qualifies, a holder of Debentures will recognize
gain on the conversion of Debentures into Common Stock and cash equal to the
lesser of (1) the excess of (a) the sum of (i) the fair market value of the
Common Stock received at the time of conversion and (ii) the cash received over
(b) the holder's tax basis in the Debentures and (2) the cash received. Such
recognized gain will likely be treated as capital gain. The tax basis for the
Common Stock received upon such conversion will be equal to the tax basis of
the Debentures converted (reduced by the portion of such basis allocable to any
fractional Common Stock interest paid in cash) decreased by the cash received
in the conversion and increased by the amount of gain recognized on the
exchange by the holder. A holder generally will recognize gain (or loss) upon a
conversion to the extent that any cash paid in lieu of a fractional share of
Common Stock exceeds (or is less than) its tax basis in such fractional share.
 
  If the conversion is not treated as a recapitalization, the holder of
Debentures may be able to contend that the conversion should be treated as a
redemption of a portion of Debentures for cash and an exchange of the remaining
Debentures for Common Stock. The holder would generally recognize gain or loss
on the redemption of the Debentures equal to the difference between the cash
received and such holder's tax basis in the Debentures that are treated as
redeemed in the exchange for cash. The holder would not recognize any gain or
loss on the exchange of the remaining Debentures for Common Stock and would
have a tax basis in the Common Stock received equal to the tax basis of the
Debentures treated as exchanged for Common Stock.
 
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<PAGE>
 
  The holding period for the Common Stock generally will include the holding
period of the Debentures converted. However, the holding period for the Common
Stock allocable to original issue discount accrued during the holder's holding
period for the Debentures converted may be treated as commencing on the day
after the date of the conversion.
 
SALE OR DISPOSITION OF COMMON STOCK
 
  A holder will recognize gain or loss on the sale or exchange of Common Stock
received upon conversion of a Debenture equal to the difference between the
amount realized on such sale or exchange and the holder's adjusted tax basis in
the Common Stock sold or exchanged. Such gain or loss would be long-term
capital gain or loss if the holder's holding period for the Common Stock were
more than one year. See "--Conversion of Debentures."
 
ADJUSTMENT OF CONVERSION PRICE
 
  Pursuant to Treasury Regulations promulgated under section 305 of the Code, a
holder of a Debenture will be treated as having received a constructive
distribution from the Company upon an adjustment in the conversion price of the
Debentures if (i) as a result of such adjustment, the proportionate interest of
such holder in the assets or earnings and profits of the Company were increased
and (ii) the adjustment was not made pursuant to a bona fide, reasonable anti-
dilution formula. An adjustment in the conversion price would not be considered
made pursuant to such a formula if the adjustment was made to compensate for
certain taxable distributions with respect to the stock into which the
Debentures are convertible. Thus, under certain circumstances, a decrease in
the conversion price for the Debentures may be taxable to a holder as a
dividend to the extent of the current or accumulated earnings and profits of
the Company. In addition, the failure to adjust fully the conversion price of
the Debentures to reflect distributions of stock dividends with respect to the
Common Stock (or rights to acquire Common Stock) may result in a taxable
dividend to the holders of the Common Stock and holders of rights to acquire
Common Stock.
 
BACKUP WITHHOLDING
 
  A holder of Series A Preferred Stock, a Debenture or Common Stock issued upon
conversion of a Debenture may be subject to backup withholding at a rate of 31%
with respect to dividends or interest (including OID) on, or the proceeds of a
sale, exchange, or redemption of, such Series A Preferred Stock, Debenture or
Common Stock, as the case may be, unless (i) such holder is a corporation or
comes within certain other exempt categories and, when required, demonstrates
this fact or (ii) provides a taxpayer identification number, certifies as to no
loss of exemption from backup withholding, and otherwise complies with
applicable backup withholding rules.
 
                       CERTAIN FEDERAL TAX CONSIDERATIONS
                         FOR NON-UNITED STATES PERSONS
   
  The following is a general summary of the material United States federal
income and estate tax considerations relevant to the exchange of Series A
Preferred Stock for Debentures by non-United States persons and the ownership,
disposition and conversion of Debentures by non-United States persons acquiring
Debentures pursuant to the Exchange Offer. To the extent it relates to matters
of law or legal conclusions this summary constitutes the opinion of Mayer,
Brown & Platt, special counsel to the Company. This summary is based on the
Code, Treasury Regulations (including Proposed Regulations and Temporary
Regulations) promulgated thereunder, IRS rulings, official pronouncements and
judicial decisions, all as in effect on the date hereof and all of which are
subject to change, possibly with retroactive effect, or different
interpretations. This summary does not discuss all the tax     
 
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<PAGE>
 
consequences that may be relevant to a particular holder that is a non-United
States person in light of the holder's particular circumstances and it is not
intended to be applicable in all respects to all categories of non-United
States persons, some of whom--such as foreign governments and certain
international organizations--may be subject to special rules not discussed
below. In addition, this summary does not address any state, local or foreign
tax considerations that may be relevant to a holder's decision to exchange
Series A Preferred Stock for Debentures pursuant to the Exchange Offer. For a
discussion of certain United States federal income tax considerations, some of
which may also be relevant to non-United States persons, see "Certain Federal
Income Tax Considerations."
 
  As used herein, "non-United States person" means any person who, for United
States federal income tax purposes, is neither (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any State or of any
of its territories or possessions or (iii) a domestic trust or estate.
   
  ALL SERIES A PREFERRED STOCK HOLDERS THAT ARE NON-UNITED STATES PERSONS ARE
ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL
AND FOREIGN TAX CONSEQUENCES OF THE EXCHANGE OF SERIES A PREFERRED STOCK FOR
DEBENTURES AND THE OWNERSHIP, CONVERSION AND DISPOSITION OF DEBENTURES RECEIVED
IN THE EXCHANGE OFFER IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.     
 
EXCHANGE OF SERIES A PREFERRED STOCK FOR DEBENTURES
   
  Subject to the discussion of backup withholding below, if a holder that is a
non-United States person proves, in a manner and under arrangements
satisfactory to the Company or other withholding agent, that the exchange of
Series A Preferred Stock for Debentures by such holder qualifies as a
transaction in which gain or loss is recognized, rather than as a dividend (see
"Certain Federal Income Tax Considerations--Exchange of Series A Preferred
Stock for Debentures," above), the Company or such withholding agent will not
withhold federal income tax on the issuance of Debentures to such holder and
such holder generally will not be subject to United States federal income tax
in respect of gain recognized on such exchange unless (i) such gain is
effectively connected with a trade or business conducted by such non-United
States person within the United States (in which case the branch profits tax
may also apply if the holder is a foreign corporation), (ii) in the case of a
non-United States person that is an individual, such holder is present if the
United States for a period or periods aggregating 183 days or more in the
taxable year of the exchange and certain other conditions are satisfied or
(iii) the Company is or has been a "United States real property holding
corporation" for federal income tax purposes within the five-year period ending
on the date of the exchange (which the Company does not believe it has been or
is currently) and certain other conditions are satisfied, and no treaty
exception is applicable.     
 
  If a holder that is a non-United States person who exchanges Series A
Preferred Stock for Debentures does not prove, in a manner satisfactory to the
Company or other withholding agent, that such exchange qualifies as a
transaction in which gain or loss is recognized, United States federal
withholding tax will be withheld from the gross proceeds to such holder in an
amount equal to 30% of such proceeds (including Debentures that such holder
would otherwise have received) unless such holder is eligible for a reduced tax
treaty rate with respect to dividend income, in which case the tax will be
withheld at the reduced rate, or establishes that it is exempt from such tax
(e.g., by providing the appropriate form certifying its status as a foreign
government). Except as may be otherwise provided in an applicable income tax
treaty, a holder that is a non-United States person will be taxed at ordinary
federal income tax rates on a net income basis if such dividend is effectively
connected with the conduct of a trade or business of such holder within the
United States (in which case the branch profits tax may also apply if the
holder is a foreign corporation) and will not be subject to the withholding tax
described
 
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<PAGE>
 
in the preceding sentence. A holder that is a non-United States person may be
eligible to obtain from the IRS a refund of tax withheld if such holder meets
one of the three tests of section 302 described above under "Certain Federal
Income Tax Considerations--Exchange of Series A Preferred Stock for Debentures"
or is otherwise able to establish that no tax (or a reduced amount of tax) was
due.
 
PAYMENTS ON DEBENTURES
 
  Subject to the discussion of backup withholding below, payments of principal,
premium (if any) and interest (including original issue discount) on a
Debenture by the Company or its agent (in its capacity as such) to a beneficial
owner that is a non-United States person will not be subject to United States
federal withholding tax; provided that (a) such person does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote, (b) such person is not a
controlled foreign corporation that is related to the Company actually or
constructively through stock ownership, (c) such person is not a bank that
acquired its Debenture in consideration of an extension of credit made pursuant
to a loan agreement entered into in the ordinary course of business and (d)
either (i) the beneficial owner certifies to the Company or its agent, under
penalties of perjury, in a suitable form that it is a not a United States
person and provides its name and address or (ii) a qualifying securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business and that
holds the Debenture certifies to the Company or its agent under penalties of
perjury that such statement has been received from the beneficial owner in a
suitable form by it or by a qualifying intermediary and furnishes the payor
with a copy thereof.
 
  If a beneficial owner of a Debenture who is a non-United States person is
engaged in a trade or business within the United States and interest (including
original issue discount) and premium, if any, on the Debenture is effectively
connected with the conduct of such trade or business, such beneficial owner may
be subject to United States federal income tax on such interest (including
original issue discount) and premium at ordinary federal income tax rates on a
net basis (in which case the branch profits tax may also apply if the holder is
a foreign corporation).
   
CONVERSION OF DEBENTURES     
 
  If a holder that is a non-United States person converts a Debenture into
Common Stock and cash and does not prove, in a manner satisfactory to the
Company or other withholding agent, that the cash received is not treated as a
dividend for U.S. federal income tax purposes, United States federal
withholding tax will be withheld from the proceeds at a rate of 30% of such
proceeds unless such holder is eligible for a reduced tax treaty rate with
respect to dividend income, in which case the tax will be withheld at the
reduced rate, or establishes that it is exempt from such tax (e.g., by
providing the appropriate form certifying its status as a foreign government).
Except as may be otherwise provided in an applicable income tax treaty, a
holder that is a non-United States person will be taxed at ordinary federal
income tax rates on a net income basis if such dividend is effectively
connected with the conduct of a trade or business of such holder within the
United States (in which case the branch profits tax may also apply if the
holder is a foreign corporation) and will not be subject to the withholding tax
described in the preceding sentence. A holder that is a non-United States
person may be eligible to obtain from the IRS a refund of tax withheld if such
holder is able to establish that no tax (or a reduced amount of tax) is due. To
the extent such a holder receives cash in lieu of fractional shares of Common
Stock, such payment will be subject to the rules described below under "--Sale
or Exchange of Debentures or Common Stock."
 
SALE OR EXCHANGE OF DEBENTURES OR COMMON STOCK
 
  Subject to the discussion of backup withholding below, any capital gain
realized upon a sale or exchange of a Debenture (including upon retirement of a
Debenture) or Common Stock issued upon
 
                                       70

<PAGE>
 
conversion of a Debenture by a beneficial owner who is a non-United States
person ordinarily will not be subject to United States federal income tax
unless (i) such gain is effectively connected with a trade or business
conducted by such non-United States person within the United States (in which
case the branch profits tax may also apply if the holder is a foreign
corporation), (ii) in the case of a non-United States person that is an
individual, such holder is present in the United States for a period or periods
aggregating 183 days or more in the taxable year of the sale or exchange and
certain other conditions are met or (iii) the Company is or has been a "United
States real property holding corporation" for federal income tax purposes
(which the Company does not believe it has been or is currently) and such non-
United States person has held, directly or constructively, more than 5% of the
outstanding Common Stock within the five-year period ending on the date of the
sale or exchange, and no treaty exception is applicable.
 
DIVIDENDS ON COMMON STOCK
 
  Generally, any dividends paid on Common Stock received upon the conversion of
a Debenture will be subject to United States federal withholding tax at a rate
of 30% of the amount of the dividend, or at a lower applicable treaty rate.
However, if the dividend is effectively connected with a United States trade or
business of a holder that is a non-United States person, it will be subject to
United States federal income tax at ordinary federal income tax rates on a net
basis (in which case the branch profits tax may also apply if such holder is a
foreign corporation), rather than the 30% withholding tax.
 
  Under current Treasury Regulations, a holder's status as a non-United States
person and eligibility for a tax treaty reduced rate of withholding will be
determined by reference to the holder's address and to any outstanding
certificates or statements concerning eligibility for a reduced rate of
withholding, unless facts and circumstances indicate that reliance is not
warranted. However, the IRS has issued Proposed Regulations that, if adopted in
final form, would require a non-United States person to provide certifications
under penalties of perjury in order to obtain treaty benefits.
 
FEDERAL ESTATE TAXES
 
  Debentures beneficially owned by an individual who at the time of death is
neither a citizen nor a resident of the United States will not be subject to
United States federal estate tax as a result of such individual's death,
provided that at the time of death the income from the Debentures was not or
would not have been effectively connected with the conduct by such individual
of a trade or business within the United States and that such individual
qualified for the exemption from United States federal withholding tax (without
regard to the certification requirements) on premium and interest that is
described above under "--Payments on Debentures."
 
  Common Stock that is beneficially owned by an individual who is neither a
citizen nor a resident of the United States at the time of death will be
included in such holder's gross estate for United States federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
 
BACKUP WITHHOLDING AND INFORMATION REPORTING
 
  Information reporting on IRS Form 1099 and backup withholding at a rate of
31% will not apply to payments of principal, premium (if any) and interest
(including original issue discount) made by the Company or a paying agent to a
non-United States holder on a Debenture if the certification described in
clause (d) under "--Payments on Debentures" above is received, provided that
the payor does not have actual knowledge that the holder is a United States
person. However, interest (including original issue discount) on a Debenture
owned by a holder that is a non-United States person may be required to be
reported annually on IRS Form 1042S.
 
  Generally, dividends on Common Stock paid to holders that are non-United
States persons that are subject to the 30% or a reduced treaty rate of United
States federal withholding tax will be exempt from backup withholding tax.
Otherwise, backup withholding of United States federal income tax at a rate of
31% may apply to dividends paid with respect to Common Stock to holders that
are not "exempt recipients" and that fail to provide certain information
(including the holder's taxpayer identification number) in the manner required
by United States law and applicable regulations.
 
                                       71

<PAGE>
 
  Payments of the proceeds from the sale by a holder that is a non-United
States person of a Debenture or Common Stock issued upon conversion of a
Debenture made to or through a foreign office of a broker will not be subject
to information reporting or backup withholding, except that if the broker is a
United States person, a controlled foreign corporation for United States tax
purposes or a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, information reporting may apply to such payments. Payments of the
proceeds from the sale of a Debenture or Common Stock to or through the United
States office of a broker is subject to information reporting and backup
withholding unless the holder certifies as to its non-United States status or
otherwise establishes an exemption from information reporting and backup
withholding.
                                  
                               LEGAL MATTERS     
 
  The validity of the Debentures will be passed upon for the Company by
Francesca M. Maher, Vice President--Law and Corporate Secretary of the Company.
Ms. Maher owns shares of Common Stock and has options to purchase additional
shares of Common Stock. Certain other legal matters will be passed upon for the
Company by Mayer, Brown & Platt, Chicago, Illinois. Certain legal matters will
be passed upon for the Dealer Managers by Shearman & Sterling, New York, New
York.
 
                                    EXPERTS
   
  The consolidated financial statements as of December 31, 1994 and 1993, and
for each of the three years in the period ended December 31, 1994, included in
the Form 8-K dated February 28, 1995, incorporated by reference in this
Registration Statement and the consolidated financial statements and related
schedules of the Company as of December 31, 1993 and 1992 and for each of the
three years in the period ended December 31, 1993, included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993,
incorporated by reference in this Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said report.
Reference is made to said reports which include an explanatory paragraph with
respect to the changes in methods of accounting for income taxes and
postretirement benefits other than pensions as discussed in the notes to the
consolidated financial statements.     
 
                                       72

<PAGE>
 
   
  Facsimile copies of the Letter of Transmittal will be accepted. Letters of
Transmittal, certificates representing shares of Series A Preferred Stock and
any other required documents should be sent by each holder of Series A
Preferred Stock or his broker, dealer, commercial bank, trust company or other
nominee to the Exchange Agent at one of the addresses as set forth below:     
 
                             The Exchange Agent Is:
                              
                           THE BANK OF NEW YORK     
 
                By Mail:                     By Hand or Overnight Courier:
                                               
     (registered or certified mail              The Bank of New York 
           recommended)                        Reorganization Section  
        The Bank of New York                     101 Barclay Street   
      Reorganization Section                          (7 East)        
        101 Barclay Street                       New York, NY 10286   
             (7 East)                                Attention:       
        New York, NY 10286                         Arwen Gibbons       
            Attention:                      
          Arwen Gibbons      
    
 
                           By Facsimile Transmission
                       (For Eligible Institutions Only):
                                 
                              (212) 571-3080     
 
         Confirm Receipt of Notice of Guaranteed Delivery by Telephone:
                                 
                              (212) 815-2742     
                                   
                                Attention:     
                                  
                               Arwen Gibbons     
                            
                         The Information Agent Is:     
                              
                           D.F. KING & CO., INC.     
                                 
                              77 Water Street     
                            
                         New York, New York 10005     
                           
                        (800) 669-5550 (Toll-Free)     
                          
                        (212) 269-5550 (Call Collect)     
        
   
   Any questions or requests for assistance or additional copies of this
 Prospectus and the Letter of Transmittal may be directed to the Information
 Agent at its telephone number and location set forth above. You may also
 contact your broker, dealer, commercial bank or trust company or other
 nominee for assistance concerning the Exchange Offer.     
 
 
                The Dealer Managers for the Exchange Offer are:
 
          GOLDMAN, SACHS & CO.                      LEHMAN BROTHERS
            85 Broad Street                     3 World Financial Center
        New York, New York 10004                New York, New York 10285
                                               (800) 524-4462 (Toll-Free)
    (800) 323-5678 (Toll-Free)     

<PAGE>
 

                                    PART II
 
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
 
 LIMITATION OF LIABILITY OF DIRECTORS
 
  The Company's Restated Certificate of Incorporation provides that no director
of the Company will be personally liable to the Company or its stockholders for
monetary damages for any breach of fiduciary duty by such director as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation Law
("DGCL") or (iv) for any transaction from which the director derived an
improper personal benefit.
 
  The above provision is intended to afford directors additional protection and
limit their potential liability from suits alleging a breach of the duty of
care by a director. As a result of the inclusion of such a provision,
stockholders may be unable to recover monetary damages against directors for
actions taken by them that constitute negligence or gross negligence or that
are otherwise in violation of their fiduciary duty of care, although it may be
possible to obtain injunctive or other equitable relief with respect to such
actions. If equitable remedies are found not to be available to stockholders in
any particular situation, stockholders may not have an effective remedy against
a director in connection with such conduct.
 
 INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
  The Company's Restated Certificate of Incorporation provides that directors
and officers of the Company shall be indemnified against liabilities arising
from their service as directors and officers to the full extent permitted by
law.
 
  Section 145 of the DGCL empowers a corporation to indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
 
  Section 145 also empowers a corporation to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person acted in any of
the capacities set forth above, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted under similar standards, except
that no such indemnification may be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless, and only to the extent that, the Court of Chancery or the
court in which such action was brought shall determine that despite the
adjudication of liability such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
 
  Section 145 further provides that to the extent that a director or officer of
a corporation has been successful in the defense of any action, suit or
proceeding referred to above or in the defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
 
                                      II-1

<PAGE>
 
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of
any other rights to which the indemnified party may be entitled; and that the
corporation is empowered to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liabilities under Section 145.
 
  The Company has purchased directors' and officers' liability insurance
covering certain liabilities incurred by its directors and officers in
connection with the performance of their duties.
 
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
  (a) Exhibits
 
  A list of exhibits included as part of this Registration Statement is set
forth in an Exhibit Index which immediately precedes such exhibits.
 
  (b) The following financial statement schedules are filed as part of this
   Registration Statement:
   
  None.     
 
  All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the Financial
Statements of the Registrant or Notes thereto.
 
ITEM 22. UNDERTAKINGS
 
  The undersigned Registrant hereby undertakes:
 
    (1) To file, during any period in which offers or sales are being made, a
  post-effective amendment to this registration statement:
 
      (i) To include any prospectus required by Section 10(a)(3) of the
    Securities Act of 1933 (the "Securities Act");
 
      (ii) To reflect in the prospectus any facts or events arising after
    the effective date of the registration statement (or the most recent
    post-effective amendment thereof) which, individually or in the
    aggregate, represent a fundamental change in the information in the
    registration statement;
 
      (iii) To include any material information with respect to the plan of
    distribution not previously disclosed in the registration statement or
    any material change to such information in the registration statement.
 
    (2) That, for the purpose of determining any liability under the
  Securities Act, each such post-effective amendment shall be deemed to be a
  new registration statement relating to the securities offered therein, and
  the offering of such securities at that time shall be deemed to be the
  initial bona fide offering thereof.
 
    (3) To remove from registration by means of a post-effective amendment
  any of the securities being registered which remain unsold at the
  termination of the offering.
 
    Insofar as indemnification for liabilities arising under the Securities
  Act may be permitted to directors, officers and controlling persons of the
  Registrant pursuant to the provisions described under Item 14 above, or
  otherwise, the Registrant has been advised that in the opinion of the
  Securities and Exchange Commission such indemnification is against public
  policy as expressed in the Securities Act and is, therefore, unenforceable.
  In the event that a claim for indemnification against such liabilities
  (other than the payment by the Registrant of expenses incurred or paid by a
  director, officer or controlling person of the Registrant in the successful
  defense of any action, suit
 
                                      II-2

<PAGE>
 
  or proceeding) is asserted by such director, officer or controlling person
  in connection with the securities being registered, the Registrant will,
  unless in the opinion of its counsel the matter has been settled by
  controlling precedent, submit to a court of appropriate jurisdiction the
  question whether such indemnification by it is against public policy as
  expressed in the Securities Act and will be governed by the final
  adjudication of such issue.
 
    (4) To respond to requests for information that is incorporated by
  reference into the Prospectus pursuant to Item 4, 10(b), 11 or 13 of Form
  S-4, within one business day of receipt of such request, and to send the
  incorporated documents by first-class mail or equally prompt means. This
  includes information contained in documents filed subsequent to the
  effective date of the registration statement throughout the date responding
  to the request.
 
    (5) To supply by means of a post-effective amendment all information
  concerning a transaction, and the company being acquired involved therein,
  that was not the subject of and included in the registration statement when
  it became effective.
 
                                      II-3

<PAGE>
 

                                   SIGNATURES
   
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDED REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN ELK GROVE TOWNSHIP, ILLINOIS
ON FEBRUARY 28, 1995.     
 
                                          UAL Corporation
 
                                                 /s/ Douglas A. Hacker
                                          By __________________________________
                                                     Douglas A. Hacker
                                              Senior Vice President--Finance
       
          
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDED
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.     
 

<TABLE>
<CAPTION>
             SIGNATURE                           TITLE                    DATE
             ---------                           -----                    ----
 
 
<S>                                  <C>                           <C>
                 *                   Chairman and Chief Executive  February 28, 1995
____________________________________   Officer
          Gerald Greenwald
 
                 *                   Senior Vice President--       February 28, 1995
____________________________________   Finance (Principal
         Douglas A. Hacker             Financial and Accounting
                                       Officer)
 
                 *                   Director                      February 28, 1995
____________________________________
         John A. Edwardson
 
                 *                   Director                      February 28, 1995
____________________________________
        Duane D. Fitzgerald
 
                 *                   Director                      February 28, 1995
____________________________________
        Richard D. McCormick
 
                 *                   Director                      February 28, 1995
____________________________________
                                                                               John F. McGillicuddy
 
 
 
                 *                   Director                      February 28, 1995
____________________________________
         James J. O'Connor
 
                 *                   Director                      February 28, 1995
____________________________________
           Harlow Osteboe
 
                 *                   Director                      February 28, 1995
____________________________________
         John F. Peterpaul
 
                 *                   Director                      February 28, 1995
____________________________________
        Paul E. Tierney, Jr.
 
                 *                   Director                      February 28, 1995
____________________________________
        John K. Van de Kamp
 
                 *                   Director                      February 28, 1995
____________________________________
         Joseph V. Vittoria
 
                 *                   Director                      February 28, 1995
____________________________________
          Paul A. Volcker
</TABLE>

     
  /s/ Douglas A. Hacker        
   
*By ______________________     
         
      Douglas A. Hacker     
          
       Attorney-in-fact     
 
                                      II-4

<PAGE>
 

                                 EXHIBIT INDEX
 

<TABLE>
<CAPTION>
                                                                     SEQUENTIAL
 EXHIBIT                                                                PAGE
 NUMBER                         DESCRIPTION                            NUMBER
 -------                        -----------                          ----------
 <C>     <S>                                                         <C>
  1.1    Form of Dealer Manager Agreement.........................
  3.1*   Restated Certificate of Incorporation as corrected on
          February 2, 1995
  4.1    Form of Indenture between the Registrant and The Bank of
          New York, as Trustee....................................
  4.2    Form of Officer's Certificate relating to the Convertible
          Subordinated Debentures.................................
  4.3    Form of Debenture........................................
  5.1    Opinion of Francesca M. Maher............................
  8.1    Opinion of Mayer, Brown & Platt (contained in "Certain
          Federal Income Tax Considerations" and "Certain Federal
          Income Tax Considerations for Non-United States Persons"
          and incorporated herein by reference)
 23.1    Consent of Francesca M. Maher. (Contained in the opinion
          filed as Exhibit 5.1.)
 23.2    Consent of Mayer, Brown & Platt..........................
 23.3    Consent of Arthur Andersen LLP...........................
 24.1*   Power of Attorney. (Contained on the signature page to
          the original registration statement.)
 25.1    Statement of Eligibility on Form T-1.....................
 99.1*   Form of Letter of Transmittal
</TABLE>

- --------
   
*  Previously filed.     





<PAGE>

                                                                     EXHIBIT 1.1
 
                            DEALER MANAGER AGREEMENT


                               _________,  1995



Goldman, Sachs & Co.
85 Broad Street
New York, New York  10004

Lehman Brothers Inc.
Three World Financial Center
New York, New York  10285

Dear Sirs:

     UAL Corporation, a Delaware corporation (the "Company"), plans to make an
offer, upon the terms and subject to the conditions referred to below (the
"Exchange Offer"), for all of its issued and outstanding shares of Series A
Convertible Preferred Stock (the "Series A Preferred Stock"), in exchange for
____% Convertible Subordinated Debentures due 2025 (the "Debentures") of the
Company to be issued under an indenture (the "Indenture") dated as of ________,
1995 between the Company and The Bank of New York, as Trustee (the "Trustee"),
on the basis of $1,000 principal amount of Debentures for every ten (10) shares
of Series A Preferred Stock. The Debentures are further described in the
Prospectus referred to below.  The Debentures will be convertible, at the option
of the holder, into a combination of cash in the amount of $541.90 and common
stock of the Company, par value $.01 per share (the "Common Stock"). The
exchange of Series A Preferred Stock for Debentures pursuant to the Exchange
Offer is referred to herein as the "Exchange."  The date of the Exchange is
referred to herein
 as the "Exchange Date."

     The Company hereby confirms its agreement with each of Goldman, Sachs & Co.
("Goldman Sachs") and Lehman Brothers Inc. ("Lehman") and, together with Goldman
Sachs, the "Dealer Managers") as follows:

     1.  Registration Statement, Prospectus, Schedule 13E-4 and Offering
Materials.  (a)  The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (File No. 33-57579), as
amended, in respect of the Debentures issuable pursuant to the Exchange Offer
and the shares of Common Stock issuable upon conversion of the Debentures, and
such registration statement and any post-

<PAGE>
 
                                       2


effective amendment thereto, each in the form heretofore delivered to you, has
been declared effective by the Commission in such form; no other document with
respect to such registration statement has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of such registration
statement has been issued and no proceeding for that purpose has been initiated
or threatened by the Commission.  The various parts of such registration
statement, including all exhibits thereto and including the documents
incorporated by reference in the prospectus contained in the registration
statement at the time such part of the registration statement became effective,
each as amended at the time such part of the registration statement became
effective, is hereinafter called the "Registration Statement"; and the final
prospectus, in the form included in the Registration Statement at the time it
became effective, is hereinafter called the "Prospectus", except that, if the
prospectus first filed by the Company pursuant to Rule 424(b) under the
Securities Act shall differ from the Prospectus, the term "Prospectus" shall
refer to the prospectus first filed pursuant to Rule 424(b); any reference
herein to the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 11 of Form S-4 under the
Securities Act, as of the date of such Prospectus; and any reference to any
amendment or supplement to the Prospectus shall be deemed to refer to and
include any documents filed after the date of such Prospectus under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
incorporated by reference in such Prospectus; and any reference to any amendment
to the Registration Statement shall be deemed to refer to and include any annual
report of the Company filed pursuant to Section 13(a) or 15(d) of the Exchange
Act after the effective date of the Registration Statement that is incorporated
by reference in the Registration Statement.

     (b) The Company has also prepared and filed with the Commission under the
Exchange Act and the rules and regulations promulgated thereunder a Statement on
Schedule 13E-4 with respect to the Exchange Offer (including the exhibits
thereto and any documents incorporated by reference therein, the "Schedule 13E-
4"; all references in this Agreement to the Schedule 13E-4 as the same may be
amended hereafter shall include all exhibits filed together with any amendments
thereto).

     (c) The Company has furnished, or will promptly furnish, to you three
copies of the Registration Statement and the Schedule 13E-4, all amendments or
supplements thereto and any other filings with the Commission in connection with
the Exchange Offer, whether filed before or after the Registration Statement
became effective, and copies of all exhibits and documents filed therewith or
incorporated therein by reference.

     (d) The Registration Statement and the Prospectus, and the related letter
from the Company to securities dealers, commercial banks, trust companies and
other nominees, letter to beneficial owners of the shares of Series A Preferred
Stock, letter of transmittal to be used by holders tendering shares of Series A
Preferred Stock pursuant to the Exchange Offer (the "Letter of Transmittal"),
notice of guaranteed delivery, and any

<PAGE>
 
                                       3

newspaper announcements, press releases and other offering materials and
information as the Company may use or prepare, approve or authorize for use in
connection with the Exchange Offer, including the Schedule 13E-4, each as
amended or supplemented from time to time, are referred to herein collectively
as the "Exchange Offer Materials."

     2.  Exchange Offer; Appointment as Dealer Managers.  (a)  The Company shall
commence the Exchange Offer as soon as practicable after the execution and
delivery hereof by publicly announcing its commencement and shall distribute by
mail, or cause to be mailed on its behalf, copies of the Prospectus, the related
Letter of Transmittal, together with a return envelope, and such of the other
Exchange Offer Materials as may be required or as the Company may elect to
furnish to each holder of record of shares of Series A Preferred Stock (the date
of the commencement of such distribution being herein called the "Commencement
Date").  The Dealer Managers shall not have any obligation to cause any Exchange
Offer Materials to be transmitted generally to the holders of shares of Series A
Preferred Stock.  If requested by a holder of shares of Series A Preferred
Stock, the Dealer Managers will provide the Information Agent with such holder's
name and address.

     (b) The Company hereby appoints you as Dealer Managers in connection with
the Exchange Offer and authorizes you to act on its behalf in accordance with
this agreement and the terms of the Exchange Offer Materials to solicit
acceptances of the Exchange Offer.

     (c) The Company has approved the Exchange Offer and the Exchange Offer
Materials and authorizes you and any other securities dealer or any commercial
bank or trust company to use the Exchange Offer Materials in connection with the
solicitation of tenders.

     (d) The Company authorizes the Dealer Managers to communicate with any
exchange agent (the "Exchange Agent") and any information agent (the
"Information Agent") appointed by the Company to act in such capacity in
connection with the Exchange Offer with respect to matters relating to the
Exchange Offer.

     (e) The Company agrees that it will not use or publish any material in
connection with the Exchange Offer, or refer to you in any such material,
without first consulting with you.

     3.  Solicitation of Tenders.  (a)  Each Dealer Manager, acting severally
and not jointly, agrees to use its best efforts to solicit tenders of shares of
Series A Preferred Stock pursuant to the Exchange Offer.  Neither the Dealer
Managers nor any affiliates, partners, directors, agents, employees or
controlling persons (if any) of the Dealer Managers shall have any liability (in
tort, contract or otherwise) to the Company or any other person related to the
Company for any act or omission on the part of any securities broker or dealer

<PAGE>
 
                                       4

(other than the Dealer Managers), commercial bank or trust company which
solicits tenders; and neither the Dealer Managers nor any of such persons or
entities referred to above shall have any liability (in tort, contract or
otherwise) hereunder except as to each of the Dealer Managers, severally and not
jointly, to the extent it is finally judicially determined that such liability
results from the gross negligence or bad faith of the Dealer Managers.  In
soliciting tenders, no such securities broker or dealer, commercial bank or
trust company shall be deemed to act as the agent of the Dealer Managers or the
Company; and you, as Dealer Managers, shall not be deemed the agent of any other
securities broker or dealer or of any commercial bank or trust company.  In
soliciting tenders, you, as Dealer Managers, shall act as independent
contractors and shall not be deemed to act as agents of the Company, and the
Company shall not be deemed to act as agent of the Dealer Managers.  Nothing
contained in this Agreement shall constitute the Dealer Managers partners or
joint venturers with the Company or any of its subsidiaries.

     (b) The Company shall furnish or case to be furnished to the Dealer
Managers, cards or lists as they become available in reasonable quantities or
copies thereof showing the names of persons, to the extent known to the Company,
who were the holders of record of the shares of Series A Preferred Stock as of a
recent date, together with their addresses, and the number of shares of Series A
Preferred Stock held by them.  At the request of the Dealer Managers, the
Company also shall use its best efforts to advise you from day to day during the
period of the Exchange Offer, as to any transfers in the holders of record of
shares of Series A Preferred Stock.  Additionally, the Company shall advise you,
to the extent known and available to the Company, of the names and addresses of
beneficial owners of the shares of Series A Preferred Stock.  Except as
otherwise provided herein, you agree to use such information only in connection
with the Exchange Offer and not to furnish such information to any other person
except in connection with the Exchange Offer.

     (c) The Company shall advise you, or cause the Exchange Agent to advise
you, at 5:00 P.M., New York City time, or as promptly as practicable thereafter,
daily (or more frequently if requested), by telephone or facsimile transmission,
as of 4:00 P.M. (or as of the time of such request) on such day with respect to
shares of Series A Preferred Stock tendered as follows:  (i) the number of
shares validly tendered on such day; (ii) the number of shares validly tendered
represented by certificates physically held by the Exchange Agent (or for which
the Exchange Agent has received confirmation of receipt of book-entry transfer
of such shares into the Exchange Agent's account at a book-entry transfer
facility pursuant to the procedures set forth in the Exchange Offer) on such
day; (iii) the number of shares represented by Notices of Guaranteed Delivery on
such day; (iv) the number of shares properly withdrawn on such day; and (v) the
cumulative totals as of such date of the number of shares in categories (i)
through (iv) above.  If requested by the Dealer Managers, on the day following
such oral communication, the Company shall furnish, or cause the Exchange Agent
to furnish, to you a written report confirming the above information which has
been

<PAGE>
 
                                       5

communicated orally.  The Company shall furnish to you, or cause the Exchange
Agent to furnish to you, such other information on the tendering holders of
Shares of Series A Preferred Stock as may be reasonably required from time to
time.

     (d) To the extent practicable until the Exchange Date, the Company shall
use its best efforts to cause copies of the Prospectus, and the Letter of
Transmittal, together with a return envelope, and other appropriate Exchange
Offer Materials to be mailed to each person who becomes a holder of record of
any shares of Series A Preferred Stock.

     4.  Covenants of the Company.  The Company covenants and agrees with you
that:

          (a) The Company will notify you, promptly after it receives notice
     thereof, of the time when the Registration Statement, or any amendment
     thereof, has been filed or becomes effective, or any amendment or
     supplement to the Prospectus or any amendment to the Schedule 13E-4 or any
     amended or additional Exchange Offer Materials shall have been filed, of
     the receipt of any comments from the Commission relating to the Exchange
     Offer, of the issuance by the Commission of any stop order or of any order
     preventing or suspending the use of any Prospectus or any of the Exchange
     Offer Materials, of the suspension of the qualification of the Debentures
     for offering or sale in connection with the Exchange Offer in any
     jurisdiction, of any request by the Commission to amend or supplement the
     Registration Statement, the Prospectus, the Schedule 13E-4 or the other
     Exchange Offer Materials or for additional information or of the
     institution or threatening of any proceedings for any such purpose.  The
     Company will also inform you, promptly after it receives notice thereof, of
     any litigation or other administrative proceeding with respect to the
     Exchange Offer.

          (b) The Company agrees to furnish each of you with as many copies of
     the Exchange Offer Materials as you may reasonably request for use by you
     in connection with the Exchange Offer, during the period of the Exchange
     Offer.  The Company will cause all amendments and supplements filed with
     the Commission to be distributed to holders of record of shares of Series A
     Preferred Stock as may be required by the Securities Act and the Exchange
     Act and the rules and regulations of the Commission thereunder.  During the
     period referred to in the second sentence of paragraph (c) below, the
     Company will deliver to each of you, without charge, such number of copies
     of the Prospectus and the other Exchange Offer Materials (as supplemented
     or amended) as such Dealer Manager may reasonably request.  During the
     period referred to in the second sentence of paragraph (c) below, before
     amending or supplementing the Registration Statement, the Prospectus, the
     Schedule 13E-4 or the other Exchange Offer Materials, or preparing or
     approving any other material for use in connection with the Exchange Offer,
     the Company will furnish you with a copy

<PAGE>
 
                                       6

     of each such proposed amendment or supplement or other material and agrees
     not to use any such proposed amendment or supplement or other material
     which shall be reasonably disapproved by you after reasonable notice
     thereof; provided that the requirements of this paragraph shall not apply
     to the Company's Annual Report on Form 10-K, its Quarterly Reports on Form
     10-Q or its Current Reports on Form 8-K so long as the Company shall
     furnish you and your counsel with copies of such documents on the date of
     filing thereof with the Commission.

          (c) The Company will comply in all material respects with the
     Securities Act and the Exchange Act and the rules and regulations of the
     Commission thereunder in connection with the Exchange Offer Materials, the
     Exchange Offer and the transactions contemplated hereby and thereby.  If,
     at any time during the period when, in the opinion of your counsel or
     counsel for the Company, a prospectus is required to be delivered by the
     Securities Act or the Exchange Act and the rules and regulations
     promulgated thereunder in connection with the Exchange Offer any event
     shall occur or condition exist as a result of which it is necessary to
     amend or supplement the Prospectus or any of the other Exchange Offer
     Materials in order that the Prospectus or other Exchange Offer Materials
     will not include an untrue statement of a material fact or omit to state a
     material fact necessary in order to make the statements therein, in the
     light of the circumstances under which they were made when such Prospectus
     or other Exchange Offer Materials are delivered, not misleading, or if it
     shall be necessary for any other reason during such period to amend or
     supplement the Registration Statement, the Schedule 13E-4 or the Prospectus
     or any of the other Exchange Offer Materials in order to comply with
     applicable law, the Company will notify you and promptly prepare and
     furnish, at its own expense, to you and file with the Commission, if
     required, such amendment or supplement, as may be necessary so that the
     statements in the Prospectus or other Exchange Offer Materials, as amended
     or supplemented, will not, in the light of the circumstances under which
     they were made when the Prospectus or the other Exchange Offer Materials
     are delivered, be misleading or so that the Registration Statement, the
     Prospectus, the Schedule 13E-4 or such other Exchange Offer Materials
     comply with applicable law.

          (d) The Company will take such action as you may reasonably request to
     qualify the Debentures for offering and sale under the securities or Blue
     Sky laws of such United States jurisdictions as you shall reasonably
     request and will comply with such law so as to permit the continuance of
     sales and dealings therein in such jurisdiction for so long as may be
     necessary to complete the distribution of the Debentures; provided that in
     connection therewith the Company shall not be required to qualify as a
     foreign corporation or as a dealer in securities, to file a general consent
     to service of process in any jurisdiction or to subject itself to taxation
     as

<PAGE>
 
                                       7

     doing business in such jurisdiction.  The Company will pay all expenses
     (including reasonable fees and disbursements of counsel) in connection
     therewith.

          (e) The Company will make generally available to the holders of the
     Debentures as soon as practicable, but in any event not later than 45 days
     after the end of the fiscal quarter of the Company during which the first
     anniversary of the effective date of the Registration Statement occurs (or
     90 days in case the period covered corresponds to a fiscal year of the
     Company) an earnings statement of the Company (in form complying with the
     provisions of Rule 158 of the Securities Act) covering such twelve-month
     period.

          (f) The Company shall promptly give you notice of any change of the
     expiration date of the Exchange Offer, of the occurrence of any event which
     could cause the Company to withdraw, rescind, modify or amend the Exchange
     Offer and of any consummation of the Exchange Offer.

          (g) The Company will promptly after the date hereof, in the event it
     has not already done so, file an application for the listing of the
     Debentures and the shares of Common Stock issuable upon conversion of the
     Debentures on the New York Stock Exchange ("NYSE") and will use its best
     efforts to cause such Debentures and shares of Common Stock to be duly
     authorized for listing thereon, subject to official notice of issuance, and
     to be registered under the Exchange Act.

          (h) Between the date of this Agreement and the consummation of the
     Exchange Offer, the Company will not, without your prior written consent,
     offer, sell or enter into any agreement to sell any common stock or any
     debt securities in a public offering registered under the Securities Act
     (other than the Debentures); provided, however, that the Company may sell
     (i) stock pursuant to employee common stock option and stock purchase plans
     and similar compensation arrangements existing on the date of this
     Agreement, (ii) common stock pursuant to the Company's international
     employees stock purchase plan and (iii) debt securities of the Company or
     United, the proceeds of which sale shall be used to retire indebtedness
     outstanding on the date of this Agreement.

          (i) The Company shall promptly give the you notice of any change of
     the record date with respect to the Series A Preferred Stock.

          (j) The Company will promptly enter into an agreement with the
     Exchange Agent substantially in the form of such agreement previously
     furnished to you.

          5.   Compensation and Expenses.  (a)  The Company shall pay to you, as
compensation for your services to the Company hereunder, a fee of _____ of the
aggregate

<PAGE>
 
                                       8

liquidation preference value of all Series A Preferred Stock tendered and
exchanged, if the aggregate liquidation preference value of Series A Preferred
Stock so tendered and exchanged equals or exceeds $300,000,000.  Such fee shall
be shared equally between the Dealer Managers and shall be paid by certified or
official bank check in immediately available funds concurrently with the
acceptance of shares of Series A Preferred Stock by the Company pursuant to the
Exchange Offer.  If the aggregate liquidation preference value of Series A
Preferred Stock tendered and exchanged is less than $300,000,000, then the
Dealer Managers will not receive any compensation.

          (b) Whether or not any shares of Series A Preferred Stock are tendered
pursuant to the Exchange Offer, the Company covenants and agrees to pay or cause
to be paid the following:  (i) the fees for the registration of the Debentures
and the shares of Common Stock issuable upon conversion of the Debentures under
the Securities Act and all fees and expenses payable (including reasonable fees
and expenses of your counsel) in connection with securing any required review by
the National Association of Securities Dealers, Inc., (ii) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the Exchange Offer, the negotiation and delivery of the
accountants' letters referred to in Section 8(h) hereof and all other expenses
incurred by the Company in connection with the preparation and filing of the
Registration Statement, any Preliminary Prospectus, the Prospectus, the Schedule
13E-4 and the other Exchange Offer Materials and any amendments or supplements
to any of the foregoing, and the cost of furnishing copies thereof to the Dealer
Managers, the Exchange Agent and the holders of the shares of Series A Preferred
Stock, (iii) your reasonable expenses and the reasonable fees and disbursements
of your counsel, (iv) all reasonable expenses (including fees and disbursements
of counsel) payable pursuant to Section 4(d) and in connection with the Blue Sky
Survey, (v) the fees and expenses of the Exchange Agent and any Information
Agent and any agent of the Exchange Agent or any Information Agent and the fees
and disbursements of counsel for the Exchange Agent and any Information Agent in
connection with the Exchange Offer, (vi) the listing fees incident to the
listing of the Debentures and the shares of Common Stock issuable upon
conversion of the Debentures on the NYSE, (vii) all costs and expenses incurred
in the preparation, printing, mailing and publishing of the Prospectus, the
Registration Statement, the Schedule 13E-4, the other Exchange Offer Materials,
this Agreement and all other documents relating to the Exchange Offer and any
amendments or supplements thereto, (viii) all fees payable to securities dealers
(including you), commercial banks, trust companies and nominees as reimbursement
of their customary mailing and handling expenses incurred in forwarding the
Exchange Offer Materials to their customers, all fees and expenses of any
forwarding agent, all advertising charges, any applicable transfer taxes not
otherwise payable by the holders of the Series A Preferred Stock in connection
with the Exchange Offer, (iv) the preparation, photocopying and distribution of
this Agreement, the Exchange Agent Agreement dated as of ______, 1995 (the
"Exchange Agent Agreement"), the Indenture, the Debentures and the Blue Sky
Survey, (x) the delivery of the Debentures to be issued pursuant to the Exchange
Offer, (xi) the fees and expenses of the

<PAGE>
 
                                       9

Trustee, including fees and disbursements of counsel for the Trustee in
connection with the Indenture and the Debentures, (xii) all other costs and
expenses incident to the Exchange Offer or to the performance by the Company of
its obligations hereunder which are not otherwise specifically provided for in
this Section and (xiii) expenses incurred by you as a result of presenting
testimony or evidence, or preparing to present testimony or evidence, in
connection with any court or administrative proceeding against the Company
arising out of or in connection with the Exchange Offer.

          6.   Representations and Warranties by the Company.  The Company
represents and warrants and agrees with each of the Dealer Managers that:

          (a) The Registration Statement conforms, and the Prospectus and any
     further amendments or supplements to the Registration Statement or the
     Prospectus will conform, in all material respects to the requirements of
     the Securities Act, the Exchange Act and the Trust Indenture Act of 1939,
     as amended (the "Trust Indenture Act"), and the rules and regulations of
     the Commission thereunder and do not or will not, as of the applicable
     effective date as to the Registration Statement and any amendment thereto
     and as of the date of the Prospectus and as of the applicable filing date
     as to any amendment or supplement thereto, contain an untrue statement of a
     material fact or omit to state a material fact required to be stated
     therein or necessary to make the statements therein not misleading;
     provided, however, that this representation and warranty shall not apply to
     any statements or omissions made in reliance upon and in conformity with
     information furnished in writing to the Company by a Dealer Manager
     expressly for use therein;

          (b) The Schedule 13E-4, as originally filed and subsequently amended,
     the other Exchange Offer Materials and any amendment or supplement thereto
     conform, or will conform, in all material respects with all applicable
     requirements of the Securities Act and the Exchange Act and the rules and
     regulations of the Commission thereunder; and none of the Schedule 13E-4,
     the other Exchange Offer Materials or any amendment or supplement thereto
     includes, or will include, an untrue statement of a material fact or omit
     to state a material fact necessary in order to make the statements therein,
     in the light of the circumstances under which they were made, not
     misleading; provided, however, that this representation and warranty shall
     not apply to any statements or omissions made in reliance upon and in
     conformity with information furnished to the Company in writing by a Dealer
     Manager expressly for use therein;

          (c) The documents incorporated by reference in the Prospectus, when
     they became effective or were filed or last amended with the Commission, as
     the case may be, conformed in all material respects to the requirements of
     the Securities Act or the Exchange Act, as applicable, and the rules and
     regulations of the Commission

<PAGE>
 
                                       10

     thereunder, and none of such documents contained an untrue statement of a
     material fact or omitted to state a material fact required to be stated
     therein or necessary to make the statements therein not misleading; and any
     further documents so filed and incorporated by reference in the Prospectus
     or any further amendment or supplement thereto, when such documents become
     effective or are filed with the Commission, as the case may be, will
     conform in all material respects to the requirements of the Securities Act
     or the Exchange Act, as applicable, and the rules and regulations of the
     Commission thereunder and will not contain an untrue statement of a
     material fact or omit to state a material fact required to be stated
     therein or necessary to make the statements therein not misleading;

          (d) This Agreement has been duly authorized, executed and delivered by
     the Company;

          (e) The consolidated financial statements included or incorporated by
     reference in the Registration Statement present fairly the consolidated
     financial position of the Company and its consolidated subsidiaries as of
     the dates indicated and the consolidated results of operations and cash
     flows and changes in financial position of the Company and its consolidated
     subsidiaries for the periods specified.  Except as stated therein, such
     financial statements have been prepared in conformity with generally
     accepted accounting principles applied on a consistent basis throughout the
     periods involved.  The financial statement schedules, if any, included or
     incorporated by reference in the Registration Statement present fairly the
     information required to be stated therein.  The selected consolidated
     financial data included in the Prospectus present fairly the information
     shown therein and have been compiled on a basis consistent with that of the
     audited consolidated financial statements included or incorporated by
     reference in the Registration Statement;

          (f) The Company is a corporation duly organized, validly existing and
     in good standing under the laws of the State of Delaware with corporate
     power and authority under such laws to own, lease and operate its
     properties and conduct its business as described in the Prospectus and to
     perform its obligations under this Agreement; and the Company is duly
     qualified to transact business as a foreign corporation and is in good
     standing in each other jurisdiction in which it owns or leases property of
     a nature, or transacts business of a type, that would make such
     qualification necessary, except to the extent that the failure to so
     qualify or be in good standing would not have a material adverse effect on
     the Company and its subsidiaries, considered as one enterprise;

          (g) United Air Lines, Inc., a Delaware corporation ("United"), is a
     corporation duly organized, validly existing and in good standing under the
     laws of the State of Delaware with corporate power and authority under such
     laws to own,

<PAGE>
 
                                       11

     lease and operate its properties and conduct its business as described in
     the Prospectus; and United is duly qualified to transact business as a
     foreign corporation and is in good standing in each other jurisdiction in
     which it owns or leases property of a nature, or transacts business of a
     type, that would make such qualification necessary, except to the extent
     that the failure to so qualify or be in good standing would not have a
     material adverse effect on United and its subsidiaries, considered as one
     enterprise;

          (h) United is an "air carrier" and a "citizen of the United States"
     within the meaning of the Federal Aviation Act of 1958, as amended, and is
     "an air carrier operating under a certificate of convenience and necessity
     issued by the Civil Aeronautics Board" within the meaning of 11 U.S.C. (S)
     1110.  All of the outstanding shares of capital stock of United have been
     duly authorized and validly issued and are fully paid and non-assessable
     and are owned by the Company, directly, free and clear of any pledge, lien,
     security interest, charge, claim, equity or encumbrance of any kind;

          (i) Since the respective dates as of which information is given in the
     Registration Statement and the Prospectus, except as otherwise stated
     therein or contemplated thereby, there has not been (A) any material
     adverse change, or any development involving a prospective material adverse
     change, in or affecting the general affairs, management, financial
     position, shareholders' equity or results of operations of the Company and
     its subsidiaries, considered as one enterprise (a "Material Adverse
     Effect"), whether or not arising in the ordinary course of business, (B)
     any transaction entered into by the Company or any subsidiary, other than
     in the ordinary course of business, that is material to the Company and its
     subsidiaries, considered as one enterprise or (C) any extraordinary
     dividend or distribution of any kind declared, paid or made by the Company
     on its capital stock;

          (j) Neither the Company nor United is in default in the performance or
     observance of any obligation, agreement, covenant or condition contained in
     any contract, indenture, mortgage, loan agreement, note, lease or other
     agreement or instrument to which it is a party or by which it may be bound
     or to which any of its properties may be subject, except for such defaults
     that would not have a Material Adverse Effect;

          (k) Except as disclosed in the Prospectus, there is no action, suit or
     proceeding before or by any government, governmental instrumentality or
     court, domestic or foreign, now pending or, to the knowledge of the
     Company, threatened against or affecting the Company or United that is
     required to be disclosed in the Prospectus or that could reasonably be
     expected to result in any Material Adverse Effect, or that could reasonably
     be expected to materially and adversely affect the

<PAGE>
 
                                       12

     properties or assets of the Company and its subsidiaries, considered as one
     enterprise, or that could reasonably be expected to materially and
     adversely affect the consummation of the transactions contemplated in this
     Agreement and the Exchange Offer; the aggregate of all pending legal or
     governmental proceedings that are not disclosed in the Prospectus to which
     the Company or United is a party or which affect any of their respective
     properties, including ordinary routine litigation incidental to their
     business, would not reasonably be expected to have a Material Adverse
     Effect;

          (l) Arthur Andersen LLP, who are reporting upon the audited financial
     statements and the financial statement schedules included or incorporated
     by reference in the Registration Statement, are independent public
     accountants as required by the Securities Act and the rules and regulations
     under the Exchange Act;

          (m) The Indenture has been duly authorized, and as of the Exchange
     Date will have been duly executed and delivered by the Company, and will be
     a valid and binding agreement of the Company, enforceable in accordance
     with its terms, except to the extent that enforcement thereof may be
     limited by bankruptcy, insolvency, reorganization, moratorium or other
     similar laws now or hereafter in effect relating to creditors' rights
     generally and by general principles of equity (regardless of whether
     enforceability is considered in a proceeding at law or in equity), and will
     conform in all material respects to the description thereof contained in
     the Prospectus; and the Indenture has been duly qualified under the Trust
     Indenture Act;

          (n) The Debentures have been duly authorized and, when executed and
     authenticated in accordance with the provisions of the Indenture and
     delivered on the Exchange Date in the Exchange, the Debentures will be
     entitled to the benefits of the Indenture and will be valid and binding
     obligations of the Company, enforceable in accordance with their terms
     except as such enforceability may be limited by bankruptcy, insolvency,
     reorganization, moratorium or other similar laws now or hereafter in effect
     relating to creditors' rights generally and by general principles of equity
     (regardless of whether enforceability is considered in a proceeding at law
     or in equity); and the Debentures will conform to the description thereof
     contained in the Prospectus;

          (o) The shares of Common Stock issuable upon conversion of the
     Debentures have been duly authorized and reserved for issuance upon such
     conversion and, when issued upon conversion of the Debentures in accordance
     with the terms of the Indenture, will have been validly issued and will be
     fully paid and nonassessable and the issuance of such shares of Common
     Stock will not be subject to any presently existing preemptive or other
     similar rights;

<PAGE>
 
                                       13

          (p) The making and consummation of the Exchange Offer have been duly
     authorized by all necessary corporate action on the part of the Company;

          (q) The execution and delivery by the Company of, and the performance
     by the Company of its obligations under, this Agreement, the Indenture, and
     the Exchange Agent Agreement, the making and consummation of the Exchange
     Offer, the issuance and delivery of the Debentures pursuant to the Exchange
     Offer, the issuance of Common Stock upon conversion of the Debentures, the
     compliance by the Company with all of the provisions of this Agreement, the
     Indenture, and the Exchange Agent Agreement, and the consummation of the
     transactions herein and therein contemplated (x) have been duly authorized
     by the Board of Directors of the Company  and all necessary corporate
     action to be taken or other corporate authorization to be obtained on the
     part of the Company will have been taken or obtained as of the Commencement
     Date and (y) do not and will not result in any violation of the charter or
     by-laws of the Company or United, and do not and will not conflict with, or
     result in a breach of any of the terms or provisions of, or constitute a
     default under, or result in the creation or imposition of any lien, charge
     or encumbrance upon any property or assets of the Company or United under
     (A) any indenture, mortgage, loan agreement, note, lease or other agreement
     or instrument to which the Company or United is a party or by which either
     may be bound or to which any of their properties may be subject or (B) any
     existing applicable law, rule, regulation, judgment, order or decree of any
     government, governmental instrumentality or court, domestic or foreign,
     having jurisdiction over the Company or United or any of their respective
     properties other than the securities or Blue Sky laws of the various states
     (except in the case of either clause (A) or (B) above for such conflicts,
     breaches or defaults or liens, charges or encumbrances that would not have
     a Material Adverse Effect);

          (r) No authorization, approval, consent or license of any government,
     governmental instrumentality or court, domestic or foreign (other than
     under the Securities Act, the Exchange Act, the Trust Indenture Act and the
     securities or blue sky laws of the various states and of any foreign
     country or jurisdiction and the rules of any exchange on which the
     Debentures may be listed), is required for the issuance and delivery of the
     Debentures pursuant to the Exchange Offer or the issuance of Common Stock
     upon conversion of the Debentures;

          (s) The Company had at the date indicated a duly authorized and
     outstanding capitalization as set forth in the Prospectus under the caption
     "Capitalization";

<PAGE>
 
                                       14

          (t) No legal or governmental proceeding is pending or, to the best of
     the Company's knowledge, is currently being threatened challenging the
     consummation of the transactions contemplated by the Agreement and the
     Exchange Offer;

          (u) On the Exchange Date, the Debentures and the Common Stock issuable
     upon conversion of the Debentures will have been approved for listing on
     the NYSE, subject to notice of issuance;

          (v) The Company has complied and, until the Exchange Offer is
     completed, will comply with all of the provisions of Florida H.B. 1771,
     codified as Section 517.075 of the Florida Statutes (Chapter 92-128 Laws of
     Florida), and all regulations promulgated thereunder relating to issuers
     doing business with Cuba;

          (w) Unless terminated in accordance with the terms of the Exchange
     Offer, the Company will accept shares of Series A Preferred Stock for
     Exchange in accordance with and subject to the terms and conditions of the
     Exchange Offer; and the Company will have made, or will cause the Exchange
     Agent to make, appropriate arrangements with The Depositary Trust Company
     and any other "qualified" registered securities depository, as may be
     necessary, to allow for the book-entry movement of tendered shares of
     Series A Preferred Stock and the Debentures between depository participants
     and the Exchange Agent; and

          (x) The Exchange Agent Agreement has been duly authorized, executed
     and delivered by the Company and constitutes a valid and binding agreement
     of the Company.

          7.   Indemnity.  (a)  The Company agrees:  (i) to indemnify and hold
harmless each Dealer Manager from and against any and all losses, claims,
damages, expenses or liabilities (or action in respect thereof) (A) which arises
out of or is based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, the Prospectus, the
Schedule 13E-4 or the other Exchange Offer Materials or in any amendment or
supplement to any of the foregoing or in any press release issued or authorized
by the Company, or which arises out of or is based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except, as to any
Dealer Manager, insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information furnished to
the Company in writing by such Dealer Manager expressly for use in the
Registration Statement, the Prospectus and any amendment or supplement thereto,
(B) which arises out of or is based upon any breach by the Company of any
representation or warranty or failure to comply with any of the agreements on
the part of the Company set forth herein or (C) which arises out of or is based
upon a withdrawal, rescission, termination

<PAGE>
 
                                       15

or modification of, or a failure to make or consummate, the Exchange Offer; and
(ii) to indemnify and hold each Dealer Manager harmless from and against any
other loss, claim, damage, expense or liability (or action in respect thereof)
which otherwise arises out of or is based upon or asserted against such Dealer
Manager in connection with its acting as Dealer Manager in connection with the
Exchange Offer or which arises in connection with any other matter referred to
in this Agreement, except as to each of the Dealer Managers, severally and not
jointly, to the extent it is finally judicially determined that any such losses,
damages, liabilities, expenses or claims referred to in this clause (ii) results
from such Dealer Manager's gross negligence or bad faith in performing the
services that are the subject of this Agreement.  In the event that you become
involved in any capacity in any action, proceeding or investigation brought by
or against any person, including stockholders of the Company, in connection with
any matter referred to in this Agreement or arising out of the Exchange Offer
for which you would be entitled to indemnification pursuant to the preceding
sentence, the Company also agrees to indemnify and hold you harmless against and
to reimburse you for (i) any and all reasonable expenses (including any legal
and other fees and expenses incurred in connection with the cost of any
investigation and preparation) incurred in connection therewith and (ii) any
amount paid in settlement of any litigation commenced or threatened or of any
claim whatsoever as set forth herein if such settlement is effected with the
written consent of the Company, which shall not be unreasonably withheld.  The
Company also agrees that neither the Dealer Managers nor any of their respective
affiliates, nor any partners, directors, agents, employees or controlling
persons (if any), as the case may be, of such Dealer Manager or any such
affiliates, shall have any liability to the Company or any person asserting
claims on behalf of or in right of the Company for or in connection with any
matter referred to in this Agreement except as to each of the Dealer Managers,
severally and not jointly, to the extent it is finally judicially determined
that any loss, damage, expense, liability or claim incurred by the Company
results from the Dealer Manager's gross negligence or bad faith in performing
the services that are the subject of this Agreement.

          Each Dealer Manager agrees, severally and not jointly, to indemnify
and hold harmless the Company to the same extent as the foregoing indemnity from
the Company to each Dealer Manager contained in Section 7(a)(i)(A) above, but
only with reference to information relating to such Dealer Manager furnished to
the Company in writing by such Dealer Manager expressly for use in the
Registration Statement, the Prospectus and any amendment of supplement thereto.

          (b) Promptly after receipt by an indemnified party under Section 7(a)
of notice of such indemnified party's involvement in any action, proceeding or
investigation, such indemnified party shall, if a claim in respect thereof is to
be made against the indemnifying party under Section 7(a), notify the
indemnifying party in writing of such involvement, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to any indemnified party except to the extent the

<PAGE>
 
                                       16

indemnifying party is materially prejudiced by such omission or from any
liability which it may have to any indemnified party otherwise than under such
Section 7(a).  In case any such action, proceeding or investigation shall be
brought against or otherwise involve any indemnified party and such indemnified
party shall notify the indemnifying party of the commencement thereof or such
indemnified party's involvement therein, the indemnifying party shall be
entitled to participate therein, and, to the extent that it shall wish, jointly
and with any other indemnifying party similarly notified, to assume the defense
thereof with counsel satisfactory to the indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party).  Upon assumption by the indemnifying party of the defense of such
action, proceeding or investigation, the indemnifying party shall not be liable
to the indemnified party under this Section 7(b) for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by the
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation, unless the indemnified party and the indemnifying party
are named parties to any such action, proceeding or investigation (including any
impleaded parties) and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
In no event shall the indemnifying part or parties be liable for the fees and
expenses of more than one counsel in addition to local counsel, if necessary,
for all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances.  No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to, or an admission of, fault, culpability or a failure to act, by
or on behalf of any indemnified party.

          (c) If for any reason the indemnification provided for in Section 7(a)
above is unavailable to or insufficient to hold the indemnified party harmless
in respect of any losses, claims, damages, expenses or liabilities (or actions
in respect thereof) referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
expenses or liabilities (or actions in respect thereof) referred to therein in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Dealer Managers on the other hand in the
matters contemplated by this Agreement.  If, however, the allocation provided by
the immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under Section 7(b), in such
proportion as is appropriate to reflect not only the relative benefits referred
to in the immediately preceding sentence but also the relative fault of the

<PAGE>
 
                                       17

Company on the one hand and of the Dealer Managers on the other with respect to
such losses, claims, damages, expenses or liabilities, as well as any other
relevant equitable considerations.  The relative benefits to the Company on the
one hand and the Dealer Managers on the other in connection with the matters
contemplated by its Agreement shall be deemed to be in the same proportion as
the maximum aggregate value of the consideration proposed to be paid by the
Company to acquire the shares of Series A Preferred Stock pursuant to the
Exchange Offer bears to the maximum aggregate fee proposed to be paid to such
Dealer Manager pursuant to Section 5 of this Agreement as a result of the
acquisition of the shares of Series A Preferred Stock pursuant to the Exchange
Offer.  The relative fault of the Company on the one hand and a Dealer Manager
on the other shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by, or
relating to, the Company and its affiliates or such Dealer Manager and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.

          (d) The Company and the Dealer Managers agree that it would not be
just and equitable if contribution pursuant to subsection (c) of this Section 7
were determined by pro rata allocation or by any other method of allocation
(even if the Dealer Managers were treated as one entity for such purpose) which
does not take account of the equitable considerations referred to in Section
7(c).  The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in Section 7(c) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim.  Notwithstanding the provisions of this Section 7, no Dealer Manager
shall be required to contribute any amount in excess of the amount by which the
fee paid to such Dealer Manager as provided in Section 5 of this Agreement
exceeds the amount of any damages which such Dealer Manager has been required to
pay in the case of statements or omissions, by reason of such untrue or alleged
untrue statement or omission or alleged omission, or, in the case of actions or
omissions, by reason of such action or omission.  No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.  The Dealer Managers' obligations to contribute
pursuant to this Section 7 are several (and not joint) in proportion to the
respective fee payable to each Dealer Manager pursuant to Section 5 of this
Agreement.

          (e) The agreements contained in Sections 2 and 5, the indemnity and
contribution agreements contained in this Section 7 and the representations and
warranties of the Company set forth in this Agreement shall remain operative and
in full force and effect regardless of (i) any termination or cancellation of
this Agreement, (ii) any completion of the engagement provided by this Agreement
or (iii) any investigation made by or on behalf of a Dealer Manager and any
officer, partner or director of a Dealer Manager or any person

<PAGE>
 
                                       18

controlling such Dealer Manager or by or on behalf of the Company, its directors
or officers, any authorized representative or any person controlling the Company
and shall survive any acquisition of the shares of Series A Preferred Stock
pursuant to the Exchange Offer or otherwise.

          (f)  The reimbursement, indemnity and contribution obligations of
the Company and the Dealer Managers under this Section 7 shall be in addition to
any liability which the Company or the Dealer Managers may otherwise have, shall

extend upon the same terms and conditions to the affiliates and the partners,
directors, agents, employees and controlling persons (if any), of the Company
and the Dealer Managers, and shall be binding upon and inure to the benefit of
any successors, assigns, heirs and personal representatives of the Company, the
Dealer Managers and any other such persons referred to above.

          8.   Conditions of Obligations.  Your respective obligations to act as
Dealer Managers hereunder shall be subject, in your discretion, to the
conditions that:

          (a) All representations, warranties and other statements of the
     Company contained herein or in certificates of any officer of the Company
     delivered pursuant to the provisions hereof are now, and on the
     Commencement Date, the expiration date of the Exchange Offer and on the
     Exchange Date shall be, true and correct.

          (b) The Company at all times during the Exchange Offer shall have
     performed all of its obligations hereunder theretofore required to be
     performed.

          (c) The Registration Statement shall have become effective on or prior
     to the Commencement Date; any Prospectus required to be filed with the
     Commission shall have been filed with the Commission pursuant to Rule
     424(b) within the applicable time period prescribed for such filing by the
     rules and regulations under the Securities Act and in accordance with
     Section 4(b) hereof; and, at any time during the Exchange Offer, no stop
     order suspending the effectiveness of the Registration Statement or any
     part thereof shall have been issued and no proceedings for that purpose
     shall have been initiated or threatened by the Commission, and all requests
     for additional information on the part of the Commission shall have been
     complied with to your reasonable satisfaction; and there shall not have
     been, at any time during the Exchange Offer, any temporary restraining
     order or injunction issued restraining or enjoining the Dealer Managers
     from acting in their respective capacities as dealer managers with respect
     to the Exchange Offer.

          (d) Mayer, Brown & Platt, counsel for the Company, shall have
     furnished to you, as Dealer Managers, their written opinion, on the
     Commencement Date and the Exchange Date, dated the date of delivery thereof
     to the effect that:

<PAGE>
 
                                       19

               (i)  The Indenture has been duly authorized, and, when duly 
          executed and delivered by the Company, will be a valid and binding
          agreement of the Company, enforceable in accordance with its terms,
          except to the extent that enforcement thereof may be limited by
          bankruptcy, insolvency, reorganization, moratorium or other similar
          laws as now or hereafter in effect relating to creditors' rights
          generally and by general principles of equity (regardless of whether
          enforceability is considered in a proceeding at law or in equity); and
          the Indenture has been duly qualified under the Trust Indenture Act;

               (ii) The Debentures have been duly authorized and, when executed
          and authenticated in accordance with the provisions of the Indenture
          and delivered on the Exchange Date in the Exchange, the Debentures
          will be entitled to the benefits of the Indenture and will be valid
          and binding obligations of the Company, enforceable in accordance with
          their terms except to the extent that enforceability thereof may be
          limited by bankruptcy, insolvency, reorganization, moratorium or other
          similar laws as now or hereafter in effect relating to creditors'
          rights generally and by general principles of equity (regardless of
          whether enforceability is considered in a proceeding at law or in
          equity);

               (iii)  The shares of Common Stock issuable upon conversion of the
          Debentures have been duly authorized and reserved for issuance upon
          such conversion and, when issued upon conversion of the Debentures in
          accordance with the terms of the Indenture will have been validly
          issued and will be fully paid and non-assessable, and the issuance of
          such shares of Common Stock will not be subject to any presently
          existing preemptive or other similar rights;

               (iv) The Debentures conform in all material respects as to legal
          matters to the descriptions thereof contained in the Prospectus under
          the caption "Description of Debentures;"

               (v) This Agreement has been duly authorized, executed and
          delivered by the Company;

               (vi) The Exchange Agent Agreement has been duly authorized,
          executed and delivered by the Company and constitutes a valid and
          binding agreement of the Company;

               (vii)  The statements in the Prospectus under the captions
          "Certain Federal Income Tax Considerations", and "Certain Federal Tax
          Considerations for Non-United States Persons" and in the Registration
          Statement in Item 20,

<PAGE>
 
                                       20

          insofar as such statements constitute a summary of the legal matters
          or documents referred to therein, fairly summarize in all material
          respects the matters referred to therein with respect to such legal
          matters and documents;

               (viii)  The Registration Statement has become effective under the
          Securities Act, and to the best of such counsel's knowledge, no stop
          order suspending the effectiveness of the Registration Statement or
          any part thereof has been issued and no proceeding for that purpose
          has been initiated or threatened by the Commission; any Prospectus
          required to be filed with the Commission was filed with the Commission
          pursuant to Rule 424(b) within the applicable time period prescribed
          for such filing by the rules and regulations under the Securities Act;

               (ix) The Registration Statement and the Prospectus and any
          further amendments and supplements thereto made by the Company prior
          to the time such opinion is delivered (other than the financial
          statements and related schedules therein and the Statement of
          Eligibility on Form T-1 of the Trustee, as to which such counsel need
          express no opinion) comply as to form in all material respects with
          the requirements of the Securities Act and the Trust Indenture Act and
          the rules and regulations thereunder; and

               (x) The Schedule 13E-4 and any further amendments thereto made by
          the Company prior to the time of delivery of such opinion and the
          documents filed as exhibits thereto (other than the financial
          statements and related schedules and other financial data therein, as
          to which such counsel need express no opinion), comply as to form in
          all material respects with the requirements of the Exchange Act and
          the rules and regulations of the Commission thereunder.

          In rendering such opinion, Mayer, Brown & Platt may state that they
express no opinion as to the laws of any jurisdiction other than the federal
laws of the United States, the laws of the State of Illinois and the General
Corporation Law of the State of Delaware.  In addition, such counsel shall state
that such counsel has participated in the preparation of the Registration
Statement, the Schedule 13E-4 and the Prospectus and no facts have come to such
counsel's attention that leads such counsel to believe that (i) the Registration
Statement (including the documents incorporated by reference therein pursuant to
Item 11 of Form S-4) at the time it became effective, or if an amendment to the
Registration Statement or an Annual Report on Form 10-K has been filed with the
Commission subsequent to the effectiveness of the Registration Statement, then
at the time such amendment became effective or at the time of the most recent
such filing, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements contained therein not misleading, or that the Prospectus as of its
date

<PAGE>
 
                                       21

and the date of such opinion (including the documents incorporated by reference
therein pursuant to Item 11 of Form S-4) contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or (ii) the Schedule 13E-4, and the
documents filed as exhibits thereto (including the items incorporated by
reference therein) contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading except that such counsel need express no
belief with respect to the financial statements and schedules and other
financial data included or incorporated by reference in the Registration
Statement, or the Prospectus or any amendment thereto, or the Statement of
Eligibility on Form T-1 of the Trustee.

          (e) Francesca M. Maher, Vice President-Law and Corporate Secretary of
the Company, shall have furnished to you, as Dealer Managers, her written
opinion, on the Commencement Date and the Exchange Date, dated the date of
delivery thereof, in form and substance satisfactory to you, to the effect that:

          (i) The Company is a corporation duly organized, validly existing and
     in good standing under the laws of the State of Delaware with corporate
     power and authority under such laws to own, lease and operate its
     properties and conduct its business as described in the Prospectus and to
     perform its obligations under the Purchase Agreement; and the Company is
     duly qualified to transact business as a foreign corporation and is in good
     standing in each other jurisdiction in which it owns or leases property of
     a nature, or transacts business of a type, that would make such
     qualification necessary, except to the extent that the failure to so
     qualify or be in good standing would not have a material adverse effect on
     the Company and its subsidiaries, considered as one enterprise;

          (ii) United is a corporation duly organized, validly existing and in
     good standing under the laws of the State of Delaware with corporate power
     and authority under such laws to own, lease and operate its properties and
     conduct its business as described in the Prospectus; and United is duly
     qualified to transact business as a foreign corporation and is in good
     standing in the States of Illinois, Indiana, California, Colorado and
     Virginia;

          (iii)  United is an "air carrier" and a "citizen of the United States"
     within the meaning of the Federal Aviation Act of 1958, as amended, and is
     "an air carrier operating under a certificate of convenience and necessity
     issued by the Civil Aeronautics Board" within the meaning of 11 U.S.C. (S)
     1110.  All of the outstanding shares of capital stock of United have been
     duly authorized and validly issued and are fully paid and non-assessable
     and are owned by the Company, directly, free and clear

<PAGE>
 
                                       22

     of any pledge, lien, security interest, charge, claim, equity or
     encumbrance of any kind;

          (iv) To such counsel's knowledge, there are no statutes or
     regulations, or any pending or threatened legal or governmental
     proceedings, required to be disclosed in the Prospectus that are not
     disclosed as required, nor any contracts or documents of a character
     required to be described or referred to in the Registration Statement, the
     Prospectus or the Schedule 13E-4 or to be filed as exhibits to the
     Registration Statement or the Schedule 13E-4 that are not described,
     referred to or filed as required, except that such counsel need not express
     an opinion as to the financial statements and schedules and other financial
     data included or incorporated by reference in the Registration Statement,
     the Prospectus or the Schedule 13E-4;

          (v) The Company has at the date indicated a duly authorized and
     outstanding capitalization as set forth in the Prospectus under the caption
     "Capitalization"; all of the issued shares of capital stock of the Company
     have been duly and validly authorized and issued and are fully paid and
     non-assessable; and all the Common Stock, the Series A Preferred Stock, the
     Series B Preferred Stock, the Series C Preferred Stock, the Class 1 ESOP
     Preferred Stock, the Class 2 ESOP Preferred Stock, the Voting Preferred
     Stock and the Director Preferred Stock (each as defined in the Prospectus)
     of the Company conform in all material respects as to legal matters to the
     descriptions thereof contained in the Prospectus under the caption
     "Description of Capital Stock;"

          (vi) The making and consummation of the Exchange Offer have been duly
     authorized by all necessary corporate action on the part of the Company;

          (vii)  The execution and delivery by the Company of, and the
     performance by the Company of its obligations under, this Agreement, the
     Indenture, and the Exchange Agent Agreement, the making and consummation of
     the Exchange Offer, the issuance and delivery of the Debentures pursuant to
     the Exchange offer, the issuance of Common Stock upon conversion of the
     Debentures, the compliance by the Company with all of the provisions of
     this Agreement, the Indenture, and the Exchange Agent Agreement, and the
     consummation of the transactions herein and therein contemplated will not
     conflict with or result in a breach or violation of any of the terms or
     provisions of, or constitute a default under the provisions of the charter
     or by-laws of the Company or United;

          (viii)  All consents, approvals, authorizations, orders or
     qualifications of or with any court or governmental agency or body of the
     United States or any state thereof required for the issuance and delivery
     of the Debentures pursuant to the Exchange Offer and the issuance of Common
     Stock upon conversion of the

<PAGE>
 
                                       23

     Debentures have been obtained and are in full force and effect, except that
     such counsel need express no opinion as to state securities or Blue Sky
     laws in connection with the distribution of the Debentures pursuant to the
     Exchange Offer;

          (ix) The descriptions in the Prospectus of the statutes, regulations,
     legal or governmental proceedings, contracts and other documents therein
     described are accurate in all material respects and fairly summarize the
     information required to be included therein;

          (x) To such counsel's knowledge, neither the Company nor United is in
     default in the performance or observance of any obligation, agreement,
     covenant or condition contained in any contract, indenture, mortgage, loan
     agreement, note, lease or other agreement or instrument to which it is a
     party or by which it may be bound or to which any of its properties may be
     subject, except for such defaults that would not have a Material Adverse
     Effect;

          (xi) The execution and delivery by the Company of, and the performance
     by the Company of its obligations under, this Agreement, the Indenture and
     the Exchange Agent Agreement, the making and consummation of the Exchange
     Offer, the issuance and delivery of the Debentures pursuant to the Exchange
     Offer, the issuance of Common Stock upon conversion of the Debentures, the
     compliance of the Company with all of the provisions of this Agreement, the
     Indenture and the Exchange Agent Agreement and the consummation of the
     transactions herein and therein contemplated have been duly authorized by
     all necessary corporate action on the part of the Company and do not and
     will not result in any violation of the charter or by-laws of the Company
     or United, and do not and will not conflict with, or result in a breach of
     any of the terms or provisions of, or constitute a default under, or result
     in the creation or imposition of any lien, charge or encumbrance upon any
     property or assets of the Company or United under (A) any indenture,
     mortgage, loan agreement, note, lease or other agreement or instrument
     known to such counsel to which the Company or United is a party or by which
     either may be bound or to which any of their properties may be subject
     (except for such conflicts, breaches or defaults or liens, charges or
     encumbrances that would not have a Material Adverse Effect) or (B) any
     existing applicable law, rule or regulation, applicable to the Company
     (other than the securities or Blue Sky laws of the various states, as to
     which such counsel expresses no opinion), or  (C) any  judgment, order or
     decree of any government, governmental instrumentality or court, domestic
     or foreign known to such counsel, having jurisdiction over the Company or
     United or any of their respective properties; and

          (xii)  The documents incorporated by reference in the Prospectus, as
     of the dates they became effective or were filed with the Commission,
     complied as to form

<PAGE>
 
                                       24

     in all material respects with the requirements of the Exchange Act and the
     rules and regulations under the Exchange Act, except that such counsel need
     not express an opinion as to the financial statements and related schedules
     and other financial data included or incorporated by reference in the
     Prospectus and the Statement of Eligibility on Form T-1 of the Trustee.

          In rendering such opinion, such counsel may indicate that she is a
member of the bar of the State of Illinois and that she expresses no opinion as
to the laws of any jurisdiction other than the federal laws of the United
States, the laws of the State of Illinois and the General Corporation Law of the
State of Delaware.  In addition, such counsel shall state that such counsel or
lawyers under her supervision have participated in the preparation of the
Registration Statement, the Schedule 13E-4, the Prospectus and the documents
incorporated by reference therein and no facts have come to such counsel's
attention that leads her to believe that (i) either the Registration Statement
(including the documents incorporated by reference therein pursuant to Item 11
of Form S-4) at the time such Registration Statement became effective, or if an
amendment to the Registration Statement or an Annual Report on Form 10-K has
been filed with the Commission subsequent to the effectiveness of the
Registration Statement, then at the time such amendment became effective or at
the time of the most recent such filing, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or the Prospectus as
of its date and the date of such opinion (including the documents incorporated
by reference therein pursuant to Item 11 of Form S-4) or any amendment or
supplement thereto, contained or contains an untrue statement of a material fact
or omitted or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or (ii) the Schedule 13E-4 (including the
documents incorporated by reference therein) contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading except that such
counsel need express no belief with respect to the financial statements and
schedules and other financial data included or incorporated by reference in the
Registration Statement, or the Prospectus or any amendment thereto or the
Statement of Eligibility on Form T-1 of the Trustee.

          (f) The Exchange Agent shall have furnished to you, as Dealer
Managers, certificates, dated the Commencement Date and the Exchange Date, of an
appropriate officer of the Exchange Agent, in form and substance satisfactory to
you, to the effect that:

          (i) The Exchange Agent has been duly incorporated and is validly
     existing as a trust company in good standing under the laws of the State of
     New York, with full power, authority and legal right under such law to
     execute, deliver and carry out the terms of the Exchange Agent Agreement;

<PAGE>
 
                                       25

          (ii) The Exchange Agent Agreement has been duly authorized, executed
     and delivered by the Exchange Agent; and

          (iii)  The Exchange Agent Agreement constitutes a valid and binding
     obligation of the Exchange Agent.

          (g) Shearman & Sterling, counsel for the Dealer Managers, shall have
furnished to you, as Dealer Managers, such opinion or opinions, on the
Commencement Date and the Exchange Date, dated the date of delivery thereof,
with respect to the validity of the Debentures, the Indenture, this Agreement,
the Registration Statement, the Prospectus and other related matters as you may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters.

          (h) At 10:00 a.m., New York City time, on the effective date of the
Registration Statement, the effective date of the most recently filed post-
effective amendment to the Registration Statement (other than an Annual Report
on Form 10-K) and the Exchange Date, Arthur Andersen LLP shall have furnished to
you, as Dealer Managers, a letter or letters, dated the respective date of
delivery thereof, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto.

          (i) (i) the Registration Statement, the Schedule 13E-4 and the
Prospectus, as they may then be amended or supplemented, shall contain all
statements that are required to be stated therein under the Securities Act and
the rules and regulations under the Securities Act and in all material respects
shall conform to the requirements of the Securities Act and the rules and
regulations under the Securities Act and none of the Registration Statement, the
Schedule 13E-4 or the Prospectus, as they may then be amended or supplemented,
shall contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) there shall not have been, since the respective dates as of
which information is given in the Registration Statement, any Material Adverse
Effect, whether or not arising in the ordinary course of business, (iii)  the
Company shall have complied with all agreements and satisfied all conditions
hereunder on its part to be performed and satisfied at or prior to the
Commencement Date and the Exchange Date and (iv) the other representations and
warranties of the Company set forth in this Agreement shall be accurate as
though expressly made at and as of the Commencement Date and the Exchange Date.

          (j) Subsequent to the execution and delivery of this Agreement and
prior to the Exchange Date, there shall not have been any downgrading, nor any
notice given to the Company or United or any public notice given, in either case
by a rating agency described below, of any intended or potential downgrading or
of a possible change that does not indicate the direction of the possible
change, in the rating accorded any of the Company's or

<PAGE>
 
                                       26

United's securities, including the Debentures, by any "nationally recognized
statistical rating organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act.

          (k) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in securities
on the NYSE; (ii) a suspension or material limitation in trading in the
Company's securities on the NYSE; (iii) a general moratorium on commercial
banking activities in New York or Illinois declared by either Federal or New
York State or Illinois State authorities, as the case may be; or (iv) the
outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the effect
of any such event specified in this clause (iv) in your judgment makes it
impracticable or inadvisable to proceed with the Exchange Offer or the delivery
of the Debentures on the Exchange Date on the terms and in the manner
contemplated in the Prospectus.

          (l) On the Exchange Date, the Debentures and the shares of Common
Stock issuable upon conversion of the Debentures shall have been duly listed,
subject to notice of issuance, on the NYSE.

          (m) The Exchange Agreement shall be in full force and effect.

          (n) The Company shall have furnished or caused to be furnished to you
on the Commencement Date and the Exchange Date a certificate of officers of the
Company, satisfactory to you as to the accuracy of the representations and
warranties of the Company herein at and as of such Date, as to the performance
by the Company of all of its respective obligations hereunder to be performed at
or prior to such Date, and as to such other matters as you may reasonably
request, and the Company shall have furnished or caused to be furnished
certificates as to the matters set forth in subsections (c), (i) and (j) of this
Section 8, and as to such other matters as you may reasonably request.

          9.   Miscellaneous.  (a) This Agreement is made solely for the benefit
of the Dealer Managers, the Company and any officer, partner, director or
controlling person referred to in Section 7 hereof, and their respective
successors, assigns and legal representatives, and no other person shall acquire
or have any right under or by virtue of this Agreement.

          (b) Except as otherwise expressly provided in this Agreement, whenever
notice is required by the provisions of this Agreement to be given to (i) the
Company, such notice shall be in writing addressed to the Company, at the
address set forth in the registration statement, Attention:  Corporate
Secretary; (ii) Goldman Sachs, such notice shall be in writing addressed to
Goldman Sachs, at 85 Broad Street, New York, New York 10004,

<PAGE>
 
                                       27

Attention:  Registration Department and (iii) Lehman, such notice shall be
addressed to Three World Financial Center, New York, New York 10285, Attention:
Kirk Meighan.

          (c) This Agreement contains the entire understanding of the parties
with respect to Goldman Sachs and Lehman acting as Dealer Managers in connection
with the Exchange Offer, superseding all prior agreements, understandings and
negotiations with respect to such activities by the Dealer Managers.  In the
event that any provision hereof shall be determined to be invalid or
unenforceable in any respect, such determination shall not affect such provision
in any other respect or any other provision hereof, which shall remain in full
force and effect.  Any right to trial by jury with respect to any action or
proceedings arising in connection with or as a result of either your engagement
or any matter referred to in this Agreement is hereby waived by the parties
hereto.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.  This Agreement may be executed in any number
of separate counterparts, each of which shall be an original, but all such
counterparts shall together constitute one and the same agreement.

<PAGE>
 
                                       28

          If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a duplicate of this letter, whereupon it
will become a binding agreement among the Company and the Dealer Managers.

                                  Very truly yours,

                                  UAL CORPORATION



                                  By: ___________________________________
                                      Name:
                                      Title:
The undersigned hereby
confirms that the foregoing
Agreement, as of the date
thereof, correctly sets forth
the agreement among the Company
and the undersigned.



________________________________
     Goldman, Sachs & Co.


LEHMAN BROTHERS INC.



By:  ______________________________
     Name:
     Title:

<PAGE>
 
                                                                        ANNEX  I

          Pursuant to Section 8(h) of the Dealer Manager Agreement, the
accountants shall furnish a letter or letters to the Dealer Managers to the
effect that:

          (i) They are independent certified public accountants with respect to
     the Company and its subsidiaries within the meaning of the Securities Act
     and the applicable published rules and regulations thereunder;

          (ii) In their opinion, the financial statements and any supplementary
     financial information and schedules examined by them and included or
     incorporated by reference in the Registration Statement or the Prospectus
     comply as to form in all material respects with the applicable accounting
     requirements of the Securities Act or the Exchange Act, as applicable, and
     the related published rules and regulations thereunder; and, if applicable,
     they have made a review in accordance with standards established by the
     American Institute of Certified Public Accountants of the unaudited
     consolidated interim financial statements of the Company for the periods
     specified in such letter, as indicated in their reports thereon, copies of
     which have been furnished to the Underwriter;

          (iii)  The unaudited selected financial information with respect to
     the consolidated results of operations and financial position of the
     Company for the five most recent fiscal years included or incorporated by
     reference in the Prospectus and included in or incorporated by reference in
     Item 6 of the Company's Annual Report on Form 10-K for the year ended
     December 31, 1993 agrees with the corresponding amounts (after restatement
     where applicable) in the audited consolidated financial statements for five
     such fiscal years which were included or incorporated by reference in the
     Company's Annual Reports on Form 10-K for such fiscal years;

          (iv) On the basis of limited procedures, not constituting an
     examination in accordance with generally accepted auditing standards,
     consisting of a reading of the unaudited financial statements and other
     information referred to below, a reading of the latest available interim
     financial statements of the Company and its subsidiaries, inspection of the
     minute books of the Company and its subsidiaries since the date of the
     latest audited financial statements included or incorporated by reference
     in the Prospectus, inquiries of officials of the Company and its
     subsidiaries responsible for financial and accounting matters and such
     other inquiries and procedures as may be specified in such letter, nothing
     came to their attention that caused them to believe that:

               (A) (i) the unaudited consolidated financial statements included
          in the Prospectus and/or included or incorporated by reference in the
          Company's Quarterly Reports on Form 10-Q incorporated by reference in
          the Prospectus do not comply as to form in all material respects with
          the applicable

<PAGE>
 
          accounting requirements of the Exchange Act and the related published
          rules and regulations, or (ii) any material modifications should be
          made to the unaudited consolidated financial statements included in
          the Prospectus or included in the Company's Quarterly Reports on Form
          10-Q incorporated by reference in the Prospectus for them to be in
          conformity with generally accepted accounting principles;

               (B) as of a specified date not more than five business days prior
          to the date of such letter, there have been any changes in the
          consolidated capital stock (other than issuances of capital stock upon
          exercise of options and upon conversions of convertible securities, in
          each case which were outstanding on the date of the latest balance
          sheet included or incorporated by reference in the Prospectus) or any
          increase in the consolidated long-term debt of the Company and its
          subsidiaries or any increase in net current liabilities, in each case
          as compared with amounts shown in the latest balance sheet included or
          incorporated by reference in the Prospectus, except in each case for
          changes, increases or decreases which the Prospectus discloses have
          occurred or may occur or which are described in such letter; and

          (v) In addition to the audit referred to in their report(s) included
     or incorporated by reference in the Prospectus and the limited procedures,
     inspection of minute books, inquiries and other procedures referred to in
     paragraphs (ii), (iii) and (vi) above, they have carried out certain
     specified procedures, not constituting an audit in accordance with
     generally accepted auditing standards, with respect to certain amounts,
     percentages and financial information specified by the Dealer Managers
     which are derived from the general accounting records of the Company and
     its subsidiaries, which appear in the Prospectus (excluding documents
     incorporated by reference), or in Part II of, or in exhibits and schedules
     to, the Registration Statement specified by the Dealer Managers or in
     documents incorporated by reference in the Prospectus specified by the
     Dealer Managers, and have compared certain of such amounts, percentages and
     financial information with the accounting records of the Company and its
     subsidiaries and have found them to be in agreement.



<PAGE>

                                                                     EXHIBIT 4.1
 
                  ===========================================


                            UAL CORPORATION, Issuer

                                       to

                         THE BANK OF NEW YORK, Trustee


                                  ------------

                                   INDENTURE

                           Dated as of April 3, 1995


                                  ------------


                           Providing for Issuance of
                     Subordinated Debt Securities in Series


                  ===========================================

<PAGE>
 
                               TABLE OF CONTENTS
                               -----------------

                                                              Page
                                                              ----

ARTICLE 1

                        Definitions and Other Provisions
                             of General Application

<TABLE>
<CAPTION> 
<C>        <S>                                                <C>
     1.1.  Definitions......................................   1
     1.2.  Compliance Certificates and Opinions.............  13
     1.3.  Form of Documents Delivered to Trustee...........  14
     1.4.  Acts of Holders..................................  14
     1.5.  Notices, etc., to Trustee and Company............  16
     1.6.  Notice to Holders; Waiver........................  16
     1.7.  Headings and Table of Contents...................  17
     1.8.  Successors and Assigns...........................  17
     1.9.  Separability.....................................  18
     1.10. Benefits of Indenture............................  18
     1.11. Governing Law....................................  18
     1.12. Legal Holidays...................................  18
     1.13. Trustee to Establish Record Dates................  18
     1.14. No Recourse Against Others.......................  19

ARTICLE 2

                                Security Forms
     2.1.  Forms Generally..................................  19
     2.2.  Form of Trustee's Certificate of Authentication..  20
     2.3.  Securities in Global Form........................  20
     2.4.  Form of Legend for Securities in Global Form.....  21

ARTICLE 3

                           The Securities...................  21
     3.1.  Amount Unlimited; Issuable in Series.............  21
     3.2.  Denominations....................................  26
     3.3.  Execution, Authentication, Delivery and Dating...  26
     3.4.  Temporary Securities.............................  30
     3.5.  Registration, Registration of Transfer and
             Exchange.......................................  31
     3.6.  Replacement Securities...........................  35
     3.7.  Payment of Interest; Interest Rights Preserved...
  36
     3.8.  Persons Deemed Owners............................  38
     3.9.  Cancellation.....................................  39
     3.10. Computation of Interest..........................  39
     3.11. Currency and Manner of Payment in Respect of
             Securities.....................................  40
     3.12. Appointment and Resignation of Exchange Rate
             Agent..........................................  44
     3.13. CUSIP Numbers....................................  45
</TABLE>


                                      -i-

<PAGE>
 

<TABLE>
<CAPTION> 

ARTICLE 4

<C>        <S>                                                  <C>
                    Satisfaction, Discharge and Defeasance
     4.1.  Termination of Company's Obligations Under the
             Indenture........................................  45
     4.2.  Application of Trust Funds.........................  47
     4.3.  Applicability of Defeasance Provisions; Company's
             Option to Effect Defeasance or Covenant
             Defeasance.......................................  47
     4.4.  Defeasance and Discharge...........................  48
     4.5.  Covenant Defeasance................................  48
     4.6.  Conditions to Defeasance or Covenant Defeasance....  49
     4.7.  Deposited Money and Government Obligations to Be
             Held in Trust....................................  51
     4.8.  Transfers and Distribution at Company Request......  52

ARTICLE 5

                             Defaults and Remedies
     5.1.  Events of Default..................................  53
     5.2.  Acceleration; Rescission and Annulment.............  54
     5.3.  Collection of Indebtedness and Suits for
             Enforcement by Trustee...........................  55
     5.4.  Trustee May File Proofs of Claim...................  55
     5.5.  Trustee May Enforce Claims Without Possession of
             Securities.......................................  55
     5.6.  Delay or Omission Not Waiver.......................  56
     5.7.  Waiver of Past Defaults............................  56
     5.8.  Control by Majority................................  56
     5.9.  Limitation on Suits by Holders.....................  56
     5.10. Rights of Holders to Receive Payment...............  57
     5.11. Application of Money Collected.....................  57
     5.12. Restoration of Rights and Remedies.................  58
     5.13. Rights and Remedies Cumulative.....................  58

ARTICLE 6

                                  The Trustee
     6.1.  Certain Duties and Responsibilities................  58
     6.2.  Rights of Trustee..................................  60
     6.3.  Trustee May Hold Securities........................  61
     6.4.  Money Held in Trust................................  61
     6.5.  Trustee's Disclaimer...............................  61
     6.6.  Notice of Defaults.................................  62
     6.7.  Reports by Trustee to Holders......................  62
     6.8.  Securityholder Lists...............................  62
     6.9.  Compensation and Indemnity.........................  62
     6.10. Replacement of Trustee.............................  63
     6.11. Acceptance of Appointment by Successor.............  65
     6.12. Eligibility; Disqualification......................  66
</TABLE>


                                     -ii-

<PAGE>
 

<TABLE>
<CAPTION> 
 
<C>        <S>                                                  <C>
     6.13. Merger, Conversion, Consolidation or Succession
             to Business......................................  67
     6.14. Appointment of Authenticating Agent................  67
     6.15. Trustee's Application for Instructions from the
             Company..........................................  69

ARTICLE 7

           Consolidation, Merger or Sale by the Company.......  69

ARTICLE 8

                            Supplemental Indentures
     8.1.  Supplemental Indentures Without Consent of
             Holders..........................................  70
     8.2.  Supplemental Indentures With Consent of Holders....  71
     8.3.  Compliance with Trust Indenture Act................  73
     8.4.  Execution of Supplemental Indentures...............  73
     8.5.  Effect of Supplemental Indentures..................  73
     8.6.  Reference in Securities to Supplemental
             Indentures.......................................  73

ARTICLE 9

                                   Covenants
     9.1.  Payment of Principal Premium, If Any, and
             Interest.........................................  74
     9.2.  Maintenance of Office or Agency....................  74
     9.3.  Money for Securities to Be Held in Trust;
             Unclaimed Money..................................  75
     9.4.  Corporate Existence................................  77
     9.5.  Insurance..........................................  77
     9.6.  Reports by the Company.............................  77
     9.7.  Annual Review Certificate..........................  78
     9.8.  Limitation on Dividends and Capital Stock
             Acquisitions.....................................  78

ARTICLE 10

                                  Redemption
     10.1.  Applicability of Article..........................  79
     10.2.  Election to Redeem; Notice to Trustee.............  79
     10.3.  Selection of Securities to Be Redeemed............  79
     10.4.  Notice of Redemption..............................  80
     10.5.  Deposit of Redemption Price.......................  81
     10.6.  Securities Payable on Redemption Date.............  81
     10.7.  Securities Redeemed in Part.......................  82
</TABLE>


                                     -iii-

<PAGE>
 
ARTICLE 11


<TABLE>
<CAPTION> 

<C>         <S>                                                       <C>
                                 Sinking Funds
     11.1.  Applicability of Article................................  83
     11.2.  Satisfaction of Sinking Fund Payments with
             Securities.............................................  83
     11.3.  Redemption of Securities for Sinking Fund...............  83

ARTICLE 12

                          Subordination of Securities
     12.1.  Securities Subordinated to Senior Indebtedness..........  84
     12.2.  Company Not to Make Payments with Respect to
             Securities in Certain Circumstances;
             Limitations on Acceleration of Securities..............  84
     12.3.  Securities Subordinated to Prior Payment of All
             Senior Indebtedness on Dissolution, Liquidation
             or Reorganization of the Company.......................  87
     12.4.  Holders to Be Subrogated to Rights of Holders of
             Senior Indebtedness....................................  89
     12.5.  Obligation of the Company Unconditional.................  89
     12.6.  Knowledge of Trustee....................................  90
     12.7.  Application by Trustee of Moneys Deposited with
             It.....................................................  90
     12.8.  Subordination Rights Not Impaired by Acts or
             Omissions of Company or Holders of Senior
             Indebtedness...........................................  91
     12.9.  Holders Authorize Trustee to Effectuate
             Subordination of Securities............................  91
     12.10. Right of Trustee to Hold Senior Indebtedness............  91
     12.11. Article 12 Not to Prevent Events of Default.............  92
     12.12. Paying Agents Other Than the Trustee....................  92
     12.13. Trustee's Compensation Not Prejudiced...................  92
     12.14. Trust Moneys Not Subordinated...........................  92
</TABLE>


                                     -iv-

<PAGE>
 
Reconciliation and tie between Indenture dated as of April 3, 1995 and the Trust
Indenture Act of 1939, as amended.


Trust Indenture Act                             Indenture
of 1939 Section                                 Section
- ---------------                                 -------

<TABLE>
<CAPTION>

<S>                                             <C>
  310(a)(1)..............                       6.12
     (a)(2)..............                       6.12
     (a)(3)..............                       TIA
     (a)(4)..............                       Not applicable
     (a)(5)..............                       TIA
     (b).................                       6.10; 6.12;
                                                TIA

  311(a).................                       TIA
     (b).................                       TIA

  312(a).................                       6.8
     (b).................                       TIA
     (c).................                       TIA

  313(a).................                       6.7; TIA
     (b).................                       TIA
     (c).................                       TIA
     (d).................                       TIA

  314(a).................                       9.6; 9.7; TIA
     (b).................                       Not Applicable
     (c)(1)..............                       1.2
     (c)(2)..............                       1.2
     (c)(3)..............                       Not Applicable
     (d).................                       Not Applicable
     (e).................                       TIA
     (f).................                       TIA

  315(a).................                       TIA
     (b).................                       6.6
     (c).................                       TIA
     (d)(1)..............                       TIA
     (d)(2)..............                       TIA
     (d)(3)..............                       TIA
     (e).................                       TIA

  316(a)(last sentence)..                       1.1
     (a)(1)(A)...........                       5.2; 5.8
     (a)(1)(B)...........                       5.7
     (b).................                       5.9; 5.10
     (c).................                       TIA
</TABLE>


                                      -v-

<PAGE>
 

<TABLE>
<CAPTION> 

<S>                                             <C>
  317(a)(1)..............                       5.3
     (a)(2)..............                       5.4
     (b).................                       9.3

  318(a).................                       1.11
     (b).................                       TIA
     (c).................                       1.11; TIA
</TABLE>


- --------------------------

This reconciliation and tie section does not constitute part of the Indenture.

                                     -vi-

<PAGE>
 
     INDENTURE, dated as of April 3, 1995, among UAL CORPORATION, a Delaware
corporation (the "Company"), as issuer, and THE BANK OF NEW YORK, a New York
banking corporation, as Trustee (the "Trustee").

                                    Recitals
                                    --------

     The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
subordinated debentures, notes or other evidences of indebtedness ("Securities")
to be issued in one or more series as herein provided.

     All things necessary to make the Securities, when executed by the Company,
the valid obligations of the Company, and to make this Indenture a valid
agreement of the Company, in accordance with their and its terms, have been
done.

     For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed as follows for the
equal and ratable benefit of the Holders of the Securities:

                                   ARTICLE 1

                        Definitions and Other Provisions
                        --------------------------------
                             of General Application
                             ----------------------

     Section 1.1.  Definitions.  (a) For all purposes of this Indenture, except
as otherwise expressly provided or unless the context otherwise requires:

          (1) the terms defined in this Article have the meanings assigned to
     them in this Article and include the plural as well as the singular;

          (2) all other terms used herein which are defined in the Trust
     Indenture Act, either directly or by reference therein, have the meanings
     assigned to them therein;

          (3) all accounting terms not otherwise defined herein have the
     meanings assigned to them in accordance with generally accepted accounting
     principles; and

          (4) the words "herein", "hereof" and "hereunder" and other words of
     similar import refer to this Indenture as a whole and not to any particular
     Article, Section or other subdivision.

          "Affiliate" of any specified Person means any Person directly or
indirectly controlling or controlled by, or under

<PAGE>
 
direct or indirect common control with, such specified Person.  For purposes of
this definition, "control" when used with respect to any specified Person means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.

          "Agent" means any Paying Agent or Registrar.

          "Authenticating Agent" means any authenticating agent appointed by the
Trustee pursuant to Section 6.14.

          "Authorized Newspaper" means a newspaper of general circulation, in
the official language of the country of publication or in the English language,
customarily published on each Business Day whether or not published on
Saturdays, Sundays or holidays, and of general circulation in the place in
connection with which the term is used or in the financial community of such
place.  Whenever successive publications in an Authorized Newspaper are required
hereunder they may be made (unless otherwise expressly provided herein) on any
Business Day and in the same or different Authorized Newspapers.

          "Bearer Security" means any Security in the form (to the extent
applicable thereto) established pursuant to Section 2.1 which is payable to
bearer.

          "Board" or "Board of Directors" means the Board of Directors of the
Company, the Executive Committee or any other duly authorized committee thereof.

          "Board Resolution" means a copy of a resolution of the Board of
Directors, certified by the Corporate Secretary or an Assistant Secretary of the
Company, to have been duly adopted by the Board of Directors and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.

          "Business Day", when used with respect to any Place of Payment or any
other particular location referred to in this Indenture or in the Securities,
means, unless otherwise specified with respect to any Securities pursuant to
Section 3.1, each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in that Place of Payment or particular
location are authorized or obligated by law or executive order to close.

          "Capital Lease" means any lease obligation of a person incurred with
respect to real property or equipment acquired or leased by such person and used
in its business that is required to be recorded on its balance sheet as a
capitalized lease in

                                      -2-

<PAGE>
 
accordance with generally accepted accounting principles consistently applied as
in effect on the date hereof.

          "Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or,
if at any time after the execution of this Indenture such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.

          "Company" means the Person named as the Company in the first paragraph
of this Indenture until one or more successor corporations shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
means such successors.

          "Company Order" and "Company Request" mean, respectively, a written
order or request signed in the name of the Company by the Chairman of the Board,
the President, any Executive Vice President or any Senior Vice President,
signing alone, by any Vice President signing together with the Treasurer, any
Assistant Treasurer, the Corporate Secretary or any Assistant Secretary of the
Company, or, with respect to Sections 3.3, 3.4, 3.5 and 6.1, any other employee
of the Company named in an Officers' Certificate delivered to the Trustee.

          "Conversion Event" means the cessation of use of (i) a Foreign
Currency both by the government of the country which issued such currency and
for the settlement of transactions by a central bank or other public
institutions of or within the international banking community, (ii) the ECU both
within the European Monetary System and for the settlement of transactions by
public institutions of or within the European Communities or (iii) any currency
unit other than the ECU for the purposes for which it was established.

          "Corporate Trust Office" means the office of the Trustee in New York,
New York at which at any particular time its corporate trust business shall be
principally administered, which office at the date hereof is located at 101
Barclay Street, New York, New York 10286.

          "corporation" includes corporations, associations, companies and
business trusts.

          "coupon" means any interest coupon appertaining to a Bearer Security.

          "Default" means any event which is, or after notice or passage of
time, or both, would be, an Event of Default.

                                      -3-

<PAGE>
 
          "Depositary", when used with respect to the Securities of or within
any series issuable or issued in whole or in part in global form, means the
Person designated as Depositary by the Company pursuant to Section 3.1 until a
successor Depositary shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter shall mean or include each Person
which is then a Depositary hereunder, and if at any time there is more than one
such Person, shall be a collective reference to such Persons.

          "Dollar" means the coin or currency of the United States as at the
time of payment is legal tender for the payment of public and private debts.

          "ECU" means the European Currency Unit as defined and revised from
time to time by the Council of the European Communities.

          "European Communities" means the European Economic Community, the
European Coal and Steel Community and the European Atomic Energy Community.

          "European Monetary System" means the European Monetary System
established by the Resolution of December 5, 1978 of the Council of the European
Communities.

          "Exchange Rate Agent", when used with respect to Securities of or
within any series, means, unless otherwise specified with respect to any
Securities pursuant to Section 3.1, a New York Clearing House bank designated
pursuant to Section 3.1 or Section 3.12.

          "Exchange Rate Officer's Certificate" means a certificate setting
forth (i) the applicable Market Exchange Rate or the applicable bid quotation
and (ii) the Dollar or Foreign Currency amounts of principal (and premium, if
any) and interest, if any (on an aggregate basis and on the basis of a Security
having the lowest denomination principal amount in the relevant currency or
currency unit), payable with respect to a Security of any series on the basis of
such Market Exchange Rate or the applicable bid quotation, signed by the
Treasurer, any Vice President or any Assistant Treasurer of the Company.

          "Flight Equipment" means:

          (a) aircraft of all types and classes used in transportation and
          incidental services, together with all aircraft instruments,
          appurtenances parts and fixtures comprising such aircraft;

                                      -4-

<PAGE>
 
          (b) aircraft engines of all types and classes used in transportation
          and incidental services, together with all accessories, appurtenances
          parts and fixtures comprising such aircraft engines;

          (c) aircraft communication equipment of all types and classes used in
          transportation and incidental services, including radio, radar,
          radiophone and other aircraft communication apparatus, together with
          all accessories, appurtenances, parts and fixtures comprising such
          aircraft communication equipment;

          (d) miscellaneous flight equipment of all types and classes (including
          miscellaneous crew flight equipment) used in transportation and
          incidental services; and

          (e) spare parts, accessories and assemblies held for use in or repair
          of the items described in (a) through (d) above.

          "Foreign Currency" means any currency issued by the government of one
or more countries other than the United States or by any recognized
confederation or association of such governments.

          "Government Obligations" means securities which are (i) direct
obligations of the United States or, if specified as contemplated by Section
3.1, the government which issued the currency in which the Securities of a
particular series are payable, for the payment of which its full faith and
credit is pledged or (ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States or, if specified
as contemplated by Section 3.1, such government which issued the foreign
currency in which the Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States or such other government, which, in either case, are not callable
or redeemable at the option of the issuer thereof, and shall also include a
depositary receipt issued by a bank or trust company as custodian with respect
to any such Government Obligation or a specific payment of interest on or
principal of any such Government Obligation held by such custodian for the
account of the holder of a depositary receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount received by the
custodian in respect of the Government Obligation evidenced by such depositary
receipt.

          "Holder" means, with respect to a Bearer Security or coupon, a bearer
thereof and, with respect to a Registered

                                      -5-

<PAGE>
 
Security, a person in whose name a Security is registered on the Register.

          "Indebtedness" of any Person means, without duplication, the principal
of, and premium, if any, and accrued and unpaid interest (including post-
petition interest) on any obligation, whether outstanding on the date hereof or
thereafter created, incurred or assumed, which is (i) indebtedness of such
Person for money borrowed, (ii) Indebtedness Guarantees by such Person of
indebtedness for money borrowed by any other Person, (iii) indebtedness
evidenced by notes, debentures, bonds or other instruments of indebtedness for
payment of which such Person is responsible or liable, (iv) obligations for the
reimbursement of any obligor on any letter of credit, bankers' acceptance or
similar credit transaction, (v) obligations of such Person under Capital Leases
and Flight Equipment leases (the amount of the Company's obligation under such
Flight Equipment leases to be computed in accordance with Statement of Financial
Accounting Standards No. 13 as if such Flight Equipment leases were Capital
Leases), (vi) obligations (net of counterparty payments) under interest rate and
currency swaps, caps, collars, options, forward or spot contracts or similar
arrangements or with respect to foreign currency hedges, and (vii) commitment
and other bank financing fees under contractual obligations associated with bank
debt; provided, however, that Indebtedness shall not include amounts owed to
trade creditors in the ordinary course of business.

          "Indebtedness Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness or other obligation of any other Person and, without limiting the
generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation (whether
arising by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment or performance thereof (or payment of damages in
the event of nonperformance) or to protect such obligee against loss in respect
thereof (in whole or in part); provided, however, that the terms Indebtedness
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business.  The term "Indebtedness Guarantee" used as a verb
has a corresponding meaning.

          "Indenture" means this Indenture as originally executed or as amended
or supplemented from time to time and shall include

                                      -6-

<PAGE>
 
the forms and terms (but not defined terms established in an Officers'
Certificate or a Board Resolution) of particular series of Securities
established as contemplated by Section 2.1 and Section 3.1.

          "Indexed Security" means a Security the terms of which provide that
the principal amount thereof payable at Stated Maturity may be more or less than
the principal face amount thereof at original issuance.

          "interest", when used with respect to an Original Issue Discount
Security which by its terms bears interest only after maturity, means interest
payable after maturity.

          "Interest Payment Date", when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.

          "Market Exchange Rate" means, unless otherwise specified with respect
to any Securities pursuant to Section 3.1, (i) for any conversion involving a
currency unit on the one hand and Dollars or any Foreign Currency on the other,
the exchange rate between the relevant currency unit and Dollars or such Foreign
Currency calculated by the method specified pursuant to Section 3.1 for the
Securities of the relevant series, (ii) for any conversion of Dollars into any
Foreign Currency, the noon buying rate for such Foreign Currency for cable
transfers quoted in New York City as certified for customs purposes by the
Federal Reserve Bank of New York and (iii) for any conversion of one Foreign
Currency into Dollars or another Foreign Currency, the spot rate at noon local
time in the relevant market at which, in accordance with normal banking
procedures, the Dollars or Foreign Currency into which conversion is being made
could be purchased with the Foreign Currency from which conversion is being made
from major banks located in New York City, London or any other principal market
for Dollars or such purchased Foreign Currency, in each case determined by the
Exchange Rate Agent.  Unless otherwise specified with respect to any Securities
pursuant to Section 3.1, in the event of the unavailability of any of the
exchange rates provided for in the foregoing clauses (i), (ii) and (iii), the
Exchange Rate Agent shall use, in its sole discretion and without liability on
its part, such quotation of the Federal Reserve Bank of New York as of the most
recent available date, or quotations from one or more major banks in New York
City, London or other principal market for such currency or currency unit in
question (which may include any such bank acting as Trustee under this
Indenture), or such other quotations as the Exchange Rate Agent shall deem
appropriate.  Unless otherwise specified by the Exchange Rate Agent, if there is
more than one market for dealing in any currency or currency unit by reason of
foreign exchange regulations or otherwise, the market to be used

                                      -7-

<PAGE>
 
in respect of such currency or currency unit shall be that upon which a
nonresident issuer of securities designated in such currency or currency unit
would purchase such currency or currency unit in order to make payments in
respect of such securities.

          "Maturity", when used with respect to any Security means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the stated Maturity or by
declaration of acceleration, call for redemption or otherwise.

          "Officer" means the Chairman of the Board of Directors, the President,
any Executive Vice President, any Senior Vice President, any Vice President or
the Corporate Secretary of the Company.

          "Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President, any Executive Vice President or any Senior Vice
President of the Company, signing alone, or by any Vice President signing
together with the Corporate Secretary, any Assistant Secretary, the Treasurer,
or any Assistant Treasurer of the Company.

          "Opinion of Counsel" means a written opinion of legal counsel, who may
be (a) the senior attorney employed by the Company, (b) Mayer, Brown & Platt or
(c) other counsel designated by the Company and who shall be acceptable to the
Trustee.

          "Original Issue Discount Security" means any Security which provides
for an amount less than the stated principal amount thereof to be due and
payable upon declaration of acceleration of the Maturity thereof pursuant to
Section 5.2.

          "Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:

          (i)  Securities theretofore cancelled by the Trustee or delivered to
     the Trustee for cancellation;

         (ii)  Securities, or portions thereof, for whose payment or redemption
     money in the necessary amount has been theretofore deposited with the
     Trustee or any Paying Agent (other than the Company) in trust or set aside
     and segregated in trust by the Company (if the Company shall act as its own
     Paying Agent) for the Holders of such Securities and any coupons
     appertaining thereto provided that, if such Securities are to be redeemed,
     notice of such redemption has

                                      -8-

<PAGE>
 
     been duly given pursuant to this Indenture or provisions therefor
     satisfactory to the Trustee have been made;

        (iii)  Securities, except to the extent provided in Sections 4.4 and
     4.5, with respect to which the Company has effected defeasance and/or
     covenant defeasance as provided in Article 4; and

         (iv)  Securities which have been paid pursuant to Section 3.6 or in
     exchange for or in lieu of which other Securities have been authenticated
     and delivered pursuant to this Indenture, other than any such Securities in
     respect of which there shall have been presented to the Trustee proof
     satisfactory to it that such Securities are held by a bona fide purchaser
     in whose hands such Securities are valid obligations of the Company;

provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, or whether
sufficient funds are available for redemption or for any other purpose, and for
the purpose of making the calculations required by section 313 of the Trust
Indenture Act, (w) the principal amount of any Original Issue Discount
Securities that may be counted in making such determination or calculation and
that shall be deemed to be Outstanding for such purpose shall be equal to the
amount of principal thereof that would be (or shall have been declared to be)
due and payable, at the time of such determination, upon a declaration of
acceleration of the maturity thereof pursuant to Section 5.2, (x) the principal
amount of any Security denominated in a Foreign Currency that may be counted in
making such determination or calculation and that shall be deemed Outstanding
for such purpose shall be equal to the Dollar equivalent, determined as of the
date such Security is originally issued by the Company as set forth in an
Exchange Rate Officer's Certificate delivered to the Trustee, of the principal
amount (or, in the case of an Original Issue Discount Security, the Dollar
equivalent as of such date of original issuance of the amount determined as
provided in clause (w) above) of such Security, (y) the principal amount of any
Indexed Security that may be counted in making such determination or calculation
and that shall be deemed outstanding for such purpose shall be equal to the
principal face amount of such Indexed Security at original issuance, unless
otherwise provided with respect to such Security pursuant to Section 3.1, and
(z) Securities owned by the Company or any other obligor upon the Securities or
any Affiliate of the Company or of such other obligor shall be disregarded and
deemed not to be outstanding, except that, in determining whether the Trustee
shall be protected in making such calculation or in relying upon any such
request, demand, authorization, direction,

                                      -9-

<PAGE>
 
notice, consent or waiver, only Securities which the Trustee knows to be so
owned shall be so disregarded.  Securities so owned which have been pledged in
good faith may be regarded as outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or such other obligor.

          "Paying Agent" means any Person authorized by the Company to pay the
principal of, premium, if any, or interest on any Securities on behalf of the
Company.

          "Periodic Offering" means an offering of Securities of a series from
time to time the specific terms of which Securities, including, without
limitation, the rate or rates of interest or formula for determining the rate or
rates of interest thereon, if any, the Stated Maturity or Stated Maturities
thereof, the original issue date or dates thereof, the redemption provisions, if
any,  with respect thereto, and any other terms specified as contemplated by
Section 3.1 with respect thereto, are to be determined by the Company upon the
issuance of such Securities.

          "Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

          "Place of Payment", when used with respect to the Securities of or
within any series, means the place or places where, subject to the provisions of
Section 9.2, the principal of, premium, if any, and interest on such Securities
are payable as specified as contemplated by Section 3.1.

          "Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.6 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.

          "Redeemable Stock" means, with respect to any person, any equity
security of such person that by its terms or otherwise (i) is required to be
redeemed prior to the maturity of any of the Securities, or is redeemable at the
option of the holder thereof at any time prior to the maturity of any of the
Securities and (ii) creates a financial obligation on such person

                                      -10-

<PAGE>
 
if any required or optional redemption obligation is not timely satisfied.

          "Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.

          "Redemption Price", when used with respect to any Security to be
redeemed, in whole or in part, means the price at which it is to be redeemed
pursuant to this Indenture.

          "Registered Security" means any Security in the form (to the extent
applicable thereto) established pursuant to Section 2.1 which is registered as
to principal and interest in the Register.

          "Regular Record Date" for the interest payable on any Interest Payment
Date on the Registered Securities of or within any series means the date
specified for that purpose as contemplated by Section 3.1.

          "Responsible Officer", when used with respect to the Trustee, shall
mean the chairman or any vice chairman of the board of directors, the chairman
or any vice chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any senior vice president, any
vice president, any assistant vice president, the secretary, the treasurer, any
assistant treasurer, the cashier, any assistant cashier, any senior trust
officer, any trust officer, the controller, any assistant controller, or any
other officer of the Trustee customarily performing functions similar to those
performed by the persons who at the time shall be such officers, respectively,
and also means, with respect to a particular corporate trust matter, any other
officer to whom such corporate trust matter is referred because of his knowledge
of and familiarity with the particular subject.

          "Security" or "Securities" has the meaning stated in the first recital
of this Indenture and more particularly means any Security or Securities of the
Company issued, authenticated and delivered under this Indenture.

          "Senior Indebtedness of the Company" means all Indebtedness of the
Company (other than the Securities), unless such Indebtedness, by its terms or
the terms of the instrument creating or evidencing it, is subordinate in right
of payment to or pari passu with the Securities.

          "Special Record Date" for the payment of any Defaulted Interest on the
Registered Securities of any issue means a date fixed by the Trustee pursuant to
Section 3.7.

                                      -11-

<PAGE>
 
          "Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security or in a coupon representing such installment of interest as the
fixed date on which the principal of such Security or such installment of
principal or interest is due and payable.

          "Subsidiary" means any corporation of which the Company at the time
owns or controls, directly or indirectly, more than 50% of the shares of
outstanding stock having general voting power under ordinary circumstances to
elect a majority of the Board of Directors of such corporation (irrespective of
whether or not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency).

          "Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, as in effect on the date of this Indenture, except as provided in
Section 8.3.

          "Trustee" means the party named as such in the first paragraph of this
Indenture until a successor Trustee replaces it pursuant to the applicable
provisions of this Indenture, and thereafter means such successor Trustee and
if, at any time, there is more than one Trustee, "Trustee" as used with respect
to the Securities of any series shall mean the Trustee with respect to the
Securities of that series.

          "United States" means, unless otherwise specified with respect to the
Securities of any series as contemplated by Section 3.1, the United States of
America (including the States and the District of Columbia), its territories,
its possessions and other areas subject to its jurisdiction.

          "U.S. Person" means, unless otherwise specified with respect to the
Securities of any series as contemplated by Section 3.1, a citizen, national or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, or an estate or trust the income of which is subject to
United States federal income taxation regardless of its source.

          "Yield to Maturity" means the yield to maturity, calculated by the
Company at the time of issuance of a series of Securities or, if applicable, at
the most recent determination of interest on such series, in accordance with
accepted financial practice.

          (b) The following terms shall have the meanings specified in the
Sections referred to opposite such term below:

                                      -12-

<PAGE>
 
            Term              Section
            ----              -------
 
    "Act"                     1.4(a)
    "Bankruptcy Law"          5.1
    "Component Currency"      3.11(d)
    "Conversion Date"         3.11(d)
    "Custodian"               5.1
    "Defaulted Interest"      3.7(b)
    "Election Date"           3.11(h)
    "Event of Default"        5.1
    "Register"                3.5
    "Registrar"               3.5
    "Valuation Date"          3.7(c)

        Section 1.2.  Compliance Certificates and Opinions.  Upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.

        Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than pursuant to Sections 2.3,
3.3 and 9.7) shall include:

          (1) a statement that each individual signing such certificate or
     opinion has read such condition or covenant and the definitions herein
     relating thereto;

          (2) a brief statement as to the nature and scope of the examination or
     investigation upon which the statements or opinions contained in such
     certificate or opinion are based;

          (3) a statement that, in the opinion of each such individual, he has
     made such examination or investigation as is necessary to enable him to
     express an informed opinion as to whether or not such condition or covenant
     has been complied with; and

          (4) a statement as to whether, in the opinion of each such individual,
     such condition or covenant has been complied with.

                                      -13-

<PAGE>
 
          Section 1.3.  Form of Documents Delivered to Trustee.  In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.

          Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous.  Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations as to such matters are
erroneous.

          Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

          Section 1.4.  Acts of Holders.  (a)  Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such Holders
in person or by agent duly appointed in writing.  Except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is hereby expressly
required, to the Company.  Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Holders signing such instrument or instruments.  Proof of execution
of any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and conclusive in favor of the
Trustee and the Company, if made in the manner provided in this Section.

          (b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary

                                      -14-

<PAGE>
 
public or other officer authorized by law to take acknowledgments of deeds,
certifying that the individual signing such instrument or writing acknowledged
to him the execution thereof.  Where such execution is by a signer acting in a
capacity other than his individual capacity, such certificate or affidavit shall
also constitute sufficient proof of his authority.  The fact and date of the
execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other reasonable manner which the
Trustee deems sufficient.

          (c) The ownership of Bearer Securities may be proved by the production
of such Bearer Securities or by a certificate executed by any trust company,
bank, banker or other depositary, wherever situated, if such certificate shall
be deemed by the Trustee to be satisfactory, showing that at the date therein
mentioned such Person had on deposit with such depositary, or exhibited to it,
the Bearer Securities therein described; or such facts may be proved by the
certificate or affidavit of the Person holding such Bearer Securities, if such
certificate or affidavit is deemed by the Trustee to be satisfactory.  The
Trustee and the Company may assume that such ownership of any Bearer Security
continues until (i) another such certificate or affidavit bearing a later date
issued in respect of the same Bearer Security is produced, (ii) such Bearer
Security is produced to the Trustee by some other Person, (iii) such Bearer
Security is surrendered in exchange for a Registered Security or (iv) such
Bearer Security is no longer outstanding.  The ownership of Bearer Securities
may also be proved in any other reasonable manner which the Trustee deems
sufficient.

          (d) The ownership of Registered Securities shall be proved by the
Register.

          (e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.

          (f) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by or pursuant to an Officers' Certificate delivered to the
Trustee, fix in advance a record date for the determination of Holders entitled
to give such request, demand, authorization, direction, notice, consent, waiver
or other Act, but the Company shall have no obligation to do so.  If such a
record date is fixed, such request, demand, authorization, direction, notice,
consent,

                                      -15-

<PAGE>
 
waiver or other Act may be given before or after such record date, but only the
Holders of record at the close of business on such record date shall be deemed
to be Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
Act, and for that purpose the Outstanding Securities shall be computed as of
such record date; provided that no such authorization, agreement or consent by
the Holders on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of clause (a) of this Section 1.4 not later
than six months after the record date.

          Section 1.5.  Notices, etc., to Trustee and Company.  Any request,
demand, authorization, direction, notice, consent, waiver or Act of Holders or
other document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,

          (1) the Trustee by any Holder or by the Company shall be sufficient
     for every purpose hereunder if made, given, furnished or filed in writing
     to or with the Trustee at its Corporate Trust Office, Attention: Corporate
     Trust Trustee Administration, or

          (2) the Company by the Trustee or by any Holder shall be sufficient
     for every purpose hereunder (unless otherwise herein expressly provided) if
     in writing and mailed, first-class postage prepaid, to the Company
     addressed to it at UAL Corporation, P.O. Box 66100, Chicago, Illinois
     60666, Attention:  Treasurer or at any other address previously furnished
     in writing to the Trustee by the Company.

          Section 1.6.  Notice to Holders; Waiver.  Where this Indenture
provides for notice to Holders of any event, (i) if any of the Securities
affected by such event are Registered Securities, such notice to the Holders
thereof shall be sufficiently given (unless otherwise herein expressly provided
or otherwise agreed to by a Holder) if in writing and mailed, first-class
postage prepaid, to each such Holder affected by such event, at his address as
it appears in the Register, within the time prescribed for the giving of such
notice and (ii) if any of the Securities affected by such event are Bearer
Securities, notice to the Holders thereof shall be sufficiently given (unless
otherwise herein or in the terms of such Bearer Securities expressly provided)
if published once in an Authorized Newspaper in New York, New York, and in such
other city or cities, if any, as may be specified as contemplated by Section
3.1(5).

          In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any

                                      -16-

<PAGE>
 
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders of Registered Securities or the sufficiency
of any notice to Holders of Bearer Securities given as provided herein.  In any
case where notice is given to Holders by publication, neither the failure to
publish such notice, nor any defect in any notice so published, shall affect the
sufficiency of such notice with respect to other Holders of Bearer Securities or
the sufficiency of any notice to Holders of Registered Securities given as
provided herein.  Any notice mailed to a Holder in the manner herein prescribed
shall be conclusively deemed to have been received by such Holder, whether or
not such Holder actually receives such notice.

          If by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice as provided above,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.  If it is
impossible or, in the opinion of the Trustee, impracticable to give any notice
by publication in the manner herein required, then such publication in lieu
thereof as shall be made with the approval of the Trustee shall constitute a
sufficient publication of such notice.

          Any request, demand, authorization, direction, notice, consent or
waiver required or permitted under this Indenture shall be in the English
language, except that any published notice may be in an official language of the
country of publication.

          Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.

          Section 1.7.  Headings and Table of Contents.  The Article and Section
headings herein and the Table of Contents are for convenience only and shall not
affect the construction hereof.

          Section 1.8.  Successors and Assigns.  All covenants and agreements in
this Indenture by the Company shall bind its successors and assigns, whether so
expressed or not.

          Any act or proceed that is required or permitted by any provision of
this Indenture and that is authorized or required to be done or performed by any
board, committee or officer of the Company shall and may be done and performed
with like force and

                                      -17-

<PAGE>
 
effect by the like board, committee or officer of any corporation that shall at
the time be the successor or assign of the Company.

          Section 1.9.  Separability.  In case any provision of this Indenture
or the Securities shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

          Section 1.10.  Benefits of Indenture.  Nothing in this Indenture or in
the Securities, expressed or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, the holders of Senior
Indebtedness of the Company, and the Holders, any benefit or any legal or
equitable right, remedy or claim under this Indenture.

          Section 1.11.  Governing Law.  THIS INDENTURE, THE SECURITIES AND ANY
COUPONS APPERTAINING THERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.  This Indenture is subject to the Trust
Indenture Act and if any provision hereof limits, qualifies or conflicts with
the Trust Indenture Act, the Trust Indenture Act shall control.

          Section 1.12.  Legal Holidays.  In any case where any Interest Payment
Date, Redemption Date, sinking fund payment date, Stated Maturity or Maturity of
any Security shall not be a Business Day at any Place of Payment, then
(notwithstanding any other provision of this Indenture of any Security or coupon
other than a provision in the Securities of any series which specifically states
that such provision shall apply in lieu of this Section) payment of principal,
premium, if any, or interest need not be made at such Place of Payment on such
date, but may be made on the next succeeding Business Day at such Place of
Payment with the same force and effect as if made on such date; provided that no
interest shall accrue on the amount so payable for the period from and after
such Interest Payment Date, Redemption Date, sinking fund payment date, Stated
Maturity or Maturity, as the case may be.

          Section 1.13.  Trustee to Establish Record Dates. The Trustee shall
fix a record date for the purpose of determining the Holders entitled to make,
give or take any request, demand, authorization, direction, notice, consent,
waiver or other action provided in this Indenture to be made, given or taken by
Holders.  If such a record date is fixed, the Holders on such record date and
only such Holders, shall be entitled to make, give or take such request, demand,
authorization, direction, notice, consent, waiver or other action, whether or
not such Holders remain Holders after such record date.  No such request,
demand, authorization, direction, notice, consent, waiver or other action

                                      -18-

<PAGE>
 
shall be valid or effective if made, given or taken more than 90 days after such
record date.

          Section 1.14.  No Recourse Against Others.  No recourse for the
payment of the principal of interest on the Securities, or for any claim based
on the Securities or this Indenture, and no recourse under or upon any
obligation, covenant or agreement of the Company in this Indenture or any
indenture supplemental thereto or in any Security or because of the creation of
any indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or of any successor corporation, either directly or through the Company
or any successor corporation, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty otherwise, all
such liability being, by the acceptance of a Security by each Holder and as part
of the consideration for the issue of such Security, expressly waived and
released.

                                   ARTICLE 2

                                 Security Forms
                                 --------------

          Section 2.1.  Forms Generally.  The Securities of each series and the
coupons, if any, to be attached thereto shall be in substantially such form
(including global form) as shall be established by delivery to the Trustee of an
Officers' Certificate or in one or more indentures supplemental hereto, in each
case with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Securities and coupons, if any, as evidenced by their
execution of the Securities and coupons, if any. If temporary Securities of any
series are issued as permitted by Section 3.4, the form thereof also shall be
established as provided in the preceding sentence.  If the forms of Securities
and coupons, if any, of any series are established by an Officers' Certificate,
such Officers' Certificate shall be delivered to the Trustee at or prior to the
delivery of the Company Order contemplated by Section 3.3 for the authentication
and delivery of such Securities.

          Unless otherwise specified as contemplated by Section 3.1, Bearer
Securities shall have interest coupons attached.

          The permanent Securities and coupons, if any, shall be printed,
lithographed or engraved or produced by any combination

                                      -19-

<PAGE>
 
of these methods or may be produced in any other manner, all as determined by
the officers executing such Securities and coupons, if any, as evidenced by
their execution of such Securities and coupons, if any.

          Section 2.2.  Form of Trustee's Certificate of Authentication.  The
Trustee's certificate of authentication shall be in substantially the following
form:

          This is one of the Securities of a series issued under the within-
mentioned Indenture.

Dated:                        The Bank of New York,
                                    as Trustee



                              By:________________________
                                 Authorized Signatory



          Section 2.3.  Securities in Global Form.  If securities of or within a
series are issuable in whole or in part in temporary or permanent global form,
as specified as contemplated by Section 3.1, then, notwithstanding clause (8) of
Section 3.1(b) and the provisions of Section 3.2, any such Security shall
represent such of the outstanding securities of such series as shall be
specified therein and may provide that it shall represent the aggregate amount
of Outstanding Securities from time to time endorsed thereon and that the
aggregate amount of Outstanding Securities represented thereby may from time to
time be reduced to reflect exchanges.  Any endorsement of a Security in global
form to reflect the amount, or any increase or decrease in the amount, or
changes in the rights of Holders, of Outstanding Securities represented thereby,
shall be made by the Trustee in such manner and upon instructions given by such
Person or Persons as shall be specified therein or in the Company Order to be
delivered to the Trustee pursuant to Section 3.3 or 3.4.  Subject to the
provisions of Section 3.3 and, if applicable, Section 3.4, the Trustee shall
deliver and redeliver any Security in global form in the manner and upon
instructions given by the Person or Persons specified therein or in the
applicable Company Order.  Any instructions by the Company with respect to
endorsement or delivery or redelivery of a Security in global form shall be in
writing but need not comply with Section 1.2 hereof and need not be accompanied
by an Opinion of Counsel.

          The provisions of the last paragraph of Section 3.3 shall apply to any
Security in global form if such Security was never issued and sold by the
Company and the Company delivers to

                                      -20-

<PAGE>
 
the Trustee the Security in global form together with written instructions
(which need not comply with Section 1.2 and need not be accompanied by an
Opinion of Counsel) with regard to the reduction in the principal amount of
Securities represented thereby, together with the written statement contemplated
by the last paragraph of Section 3.3.

     Notwithstanding the provisions of Sections 2.1 and 3.7, unless otherwise
specified as contemplated by Section 3.1, payment of principal of, premium, if
any, and interest on any Security in permanent global form shall be made to the
Person or Persons specified therein.

          Section 2.4.  Form of Legend for Securities in Global Form.  Any
Security in global form authenticated and delivered hereunder shall bear a
legend in substantially the following form, or such other form as deemed
necessary or desirable by the Company and specified in a Company Order delivered
to the Trustee:

          This Security is in global form within the meaning of the Indenture
     hereinafter referred to and is registered in the name of a Depositary or a
     nominee of a Depositary.  Unless and until it is exchanged in whole or in
     part for Securities in certificated form, this Security may not be
     transferred except as a whole by the Depositary to a nominee of the
     Depositary or by a nominee of the Depositary to the Depositary or another
     nominee of the Depositary or by the Depositary or any such nominee to a
     successor Depositary or a nominee of such successor Depositary.


                                   ARTICLE 3

                                 The Securities
                                 --------------

          Section 3.1.  Amount Unlimited; Issuable in Series.  (a)  The
aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.  The Securities may be issued from
time to time in one or more series.

          (b) The following matters shall be established and (subject to Section
3.3) set forth, or determined in the manner provided, in an Officers'
Certificate and a Board Resolution of the Company, or one or more indentures
supplemental hereto:

          (1) the title of the Securities of the series (which title shall
     distinguish the Securities of the series from all other Securities);

                                      -21-

<PAGE>
 
          (2) any limit upon the aggregate principal amount of the Securities of
     the series which may be authenticated and delivered under this Indenture
     (which limit shall not pertain to (i) Securities authenticated and
     delivered upon registration of transfer of, or in exchange for, or in lieu
     of, other Securities of the series pursuant to Section 3.4, 3.5, 3.6, 8.6,
     or 10.7 and (ii) any Securities which, pursuant to the last paragraph of
     Section 3.3, are deemed never to have been authenticated and delivered
     hereunder)

          (3) the date or dates on which the principal of the Securities of the
     series is payable or the method of determination thereof;

          (4) the rate or rates at which the Securities of the series shall bear
     interest, if any, or the method of calculating such rate or rates of
     interest, the date or dates from which such interest shall accrue or the
     method by which such date or dates shall be determined, the Interest
     Payment Dates on which any such interest shall be payable and, with respect
     to Registered Securities, the Regular Record Date, if any, for the interest
     payable on any Registered Security on any Interest Payment Date;

          (5) the place or places where, subject to the provisions of Section
     9.2, the principal of, premium, if any, and interest, if any, on Securities
     of the series shall be payable;

          (6) the period or periods within which, the price or prices at which,
     the currency or currencies (including currency units) in which, and the
     other terms and conditions upon which, Securities of the series may be
     redeemed, in whole or in part, at the option of the Company and, if other
     than as provided in Section 10.3, the manner in which the particular
     Securities of such series (if less than all Securities of such series are
     to be redeemed) are to be selected for redemption;

          (7) the obligation, if any, of the Company to redeem or purchase
     Securities of the series pursuant to any sinking fund or analogous
     provisions or upon the happening of a specified event or at the option of a
     Holder thereof and the period or periods within which, the price or prices
     at which, and the other terms and conditions upon which, Securities of the
     series shall be redeemed or purchased, in whole or in part, pursuant to
     such obligation;

          (8) if other than denominations of $1,000 and any integral multiple
     thereof, if Registered Securities, and if other than denominations of
     $5,000 and $100,000, if Bearer

                                      -22-

<PAGE>
 
     Securities, the denominations in which Securities of the series shall be
     issuable;

          (9) if other than Dollars, the currency or currencies (including
     currency units) in which the principal of, premium, if any, and interest,
     if any, on the Securities of the series shall be payable, or in which the
     Securities of the series shall be denominated, the particular provisions
     applicable thereto in accordance with, in addition to, or in lieu of the
     provisions of Section 3.11, and whether the Securities of the series may be
     satisfied and discharged other than as provided in Article 4;

          (10) if the payments of principal of, premium, if any, or interest, if
     any, on the Securities of the series are to be made, at the election of the
     Company or a Holder, in a currency or currencies (including currency units)
     other than that in which such Securities are denominated or designated to
     be payable, the currency or currencies (including currency units) in which
     such payments are to be made, the terms and conditions of such payments and
     the manner in which the exchange rate with respect to such payments shall
     be determined, the particular provisions applicable thereto in accordance
     with, in addition to, or in lieu of the provisions of Section 3.11, and
     whether the Securities of the series may be satisfied and discharged other
     than as provided in Article 4;

          (11) if the amount of payments of principal of, premium, if any, and
     interest, if any, on the Securities of the series shall be determined with
     reference to an index, formula or other method (which index, formula or
     method may be based, without limitation, on a currency or currencies
     (including currency units) other than that in which the Securities of the
     series are denominated or designated to be payable), the index, formula or
     other method by which such amounts shall be determined;

          (12) if other than the principal amount thereof, the portion of the
     principal amount of such Securities of the series which shall be payable
     upon declaration of acceleration thereof pursuant to Section 5.2 or the
     method by which such portion shall be determined;

          (13) if other than as provided in Section 3.7, the Person to whom any
     interest on any Registered Security of the series shall be payable, the
     manner in which, or the Person to whom, any interest on any Bearer
     Securities of the series shall be payable, and the extent to which, or the
     manner in which (including any certification requirement and other terms
     and conditions under which), any interest

                                      -23-

<PAGE>
 
     payable on a temporary or permanent global Security on an Interest Payment
     Date will be paid if other than in the manner provided in Section 2.3 and
     Section 3.4, as applicable;

          (14) provisions, if any, granting special rights to the Holders of
     Securities of the series upon the occurrence of such events as may be
     specified;

          (15) any deletions from, modifications of or additions to the Events
     of Default set forth in Section 5.1 or covenants of the Company set forth
     in Article 9 pertaining to the Securities of the series;

          (16) under what circumstances, if any, the Company will pay additional
     amounts on the Securities of that series held by a Person who is not a U.S.
     Person in respect of taxes or similar charges withheld or deducted and, if
     so, whether the Company will have the option to redeem such Securities
     rather than pay such additional amounts (and the terms of any such option);

          (17) whether Securities of the series shall be issuable as Registered
     Securities or Bearer Securities (with or without interest coupons), or
     both, and any restrictions applicable to the offering, sale or delivery of
     Bearer Securities and, if other than as provided in Section 3.5, the terms
     upon which Bearer Securities of a series may be exchanged for Registered
     Securities of the same series and vice versa;

          (18) the date as of which any Bearer Securities of the series and any
     temporary global Security representing outstanding Securities of the series
     shall be dated if other than the date of original issuance of the first
     Security of the series to be issued;

          (19) the applicability, if any, to the Securities of or within the
     series of Sections 4.4 and 4.5, or such other means of defeasance or
     covenant defeasance as may be specified for the Securities and coupons, if
     any, of such series, and whether, for the purpose of such defeasance or
     covenant defeasance, the term "Government Obligations" shall include
     obligations referred to in the definition of such term which are not
     obligations of the United States or an agency or instrumentality of the
     United States;

          (20) if other than the Trustee, the identity of the Registrar and any
     Paying Agent;

                                      -24-

<PAGE>
 
          (21) any terms which may be related to warrants issued by the Company
     in connection with, or for the purchase of, Securities of such series,
     including whether and under what circumstances the Securities of any series
     may be used toward the exercise price of any such warrants;

          (22) the designation of the initial Exchange Rate Agent, if any;

          (23) whether Securities of the series shall be issued in whole or in
     part in temporary or permanent global form and, if so, (i) the initial
     Depositary for such global Securities and (ii) if other than as provided in
     Section 3.4 or 3.5, as applicable, whether and the circumstance under which
     beneficial owners of interests in any Securities of the series in temporary
     or permanent global form may exchange such interests for Securities of such
     series and of like tenor of any authorized form and denomination;

          (24) whether Securities of the Series shall be convertible into shares
     of common stock of the Company and the terms and conditions upon which the
     Securities will be convertible, including the conversion price, the
     conversion period and other conversion provisions;

          (25) if other than as provided in Article 12, the terms and conditions
     under which the Securities will be subordinated to the Senior Indebtedness
     of the Company; and

          (26) any other terms of the series (which terms shall not be
     inconsistent with the provisions of this Indenture), including any terms
     which may be required by or advisable under United States laws or
     regulations or advisable in connection with the marketing of Securities of
     the series.

          (c) All Securities of any one series and coupons, if any, appertaining
to any Bearer Securities of such series shall be substantially identical except
as to denomination and the rate or rates of interest, if any, and Stated
Maturity, the date from which interest, if any, shall accrue and except as may
otherwise be provided in or pursuant to an Officers' Certificate pursuant to
this Section 3.1 or in an indenture supplemental hereto.  All Securities of any
one series need not be issued at the same time and, unless otherwise provided, a
series may be reopened, without the consent of the Holders, for issuances of
additional Securities of such series or for the establishment of additional
terms with respect to the Securities of such series.

          (d) If any of the terms of the Securities of any series are
established by action taken pursuant to a Board Resolution, a copy of such Board
Resolution shall be certified by

                                      -25-

<PAGE>
 
the Corporate Secretary or an Assistant Secretary of the Company and delivered
to the Trustee at or prior to the delivery of the Officers' Certificate of the
Company, setting forth, or providing the manner for determining, the terms of
the Securities of such series, and an appropriate record of any action taken
pursuant thereto in connection with the issuance of any Securities of such
series shall be delivered to the Trustee prior to the authentication and
delivery thereof.  With respect to Securities of a series subject to a Periodic
Offering, such Board Resolutions or Officers' Certificates may provide general
terms for Securities of such series and provide either that the specific terms
of particular Securities of such series shall be specified in a Company Order,
or that such terms shall be determined by the Company, or one or more of its
agents designated in the Officers' Certificate, in accordance with the Company
Order, as contemplated by the first proviso of the third paragraph of Section
3.3.

          (e) Each Security issued hereunder shall provide that the Company and,
by its acceptance of a Security or a beneficial interest therein, the Holder of,
and any Person that acquires a beneficial interest in, such Security agree that
for United States federal, state and local tax purposes it is intended that such
Security constitute indebtedness.

          Section 3.2.  Denominations.  Unless otherwise provided as
contemplated by Section 3.1, any Registered Securities of a series shall be
issuable in denominations of $1,000 and any integral multiple thereof and any
Bearer Securities of a series shall be issuable in denominations of $5,000 and
$100,000.

          Section 3.3.  Execution, Authentication, Delivery and Dating.
Securities shall be executed on behalf of the Company by its Chairman or
President and Chief Executive Officer and attested to by the Secretary of the
Company.  The Company's seal shall be affixed to the Securities or a facsimile
of such seal shall be engraved, printed, or otherwise reproduced on the
Securities.  The signatures of such officers on the Securities may be manual or
facsimile.  The coupons, if any, of Bearer Securities shall bear the facsimile
signature of the Chairman or President and Chief Executive Officer and shall be
attested by the Secretary of the Company.

          Securities and coupons bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.

                                      -26-

<PAGE>
 
          At any time and from time to time, the Company may deliver Securities
and any coupons appertaining thereto, of any series executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and make available for delivery such Securities, and the Trustee
in accordance with the Company Order shall authenticate and deliver such
Securities; provided, however, that in the case of Securities offered in a
Periodic Offering, the Trustee shall authenticate and deliver such Securities
from time to time in accordance with such other procedures (including, without
limitation, the receipt by the Trustee of oral or electronic instructions from
the Company or its duly authorized agents, promptly confirmed in writing)
acceptable to the Trustee as may be specified by or pursuant to a Company Order
delivered to the Trustee prior to the time of the first authentication of
Securities of such series.

          If the form or terms of the Securities of a series have been
established by or pursuant to one or more Officers' Certificates as permitted by
Sections 2.1 and 3.1, in authenticating such Securities and accepting the
additional responsibilities under this Indenture in relation to such Securities,
the Trustee shall be entitled to receive, and (subject to section 315(a) through
(d) of the Trust Indenture Act) shall be fully protected in relying upon, an
Opinion of Counsel stating,

          (1) that the forms and terms of such Securities and any coupons have
     been established in conformity with the provisions of this Indenture; and

          (2) that such Securities together with any coupons appertaining
     thereto, when authenticated and delivered by the Trustee and issued by the
     Company in the manner and subject to any conditions specified in such
     Opinion of Counsel, will constitute valid and legally binding obligations
     of the Company, enforceable in accordance with their terms, subject to
     customary exceptions;

     provided, however, that, with respect to Securities of a series subject to
     a Periodic Offering, the Trustee shall be entitled to receive such Opinion
     of Counsel only once at or prior to the time of the first authentication of
     Securities of such series and that the Opinion of Counsel above may state:

               (x) that the forms of such Securities have been, and the terms of
          such Securities (when established in accordance with such procedures
          as may be specified from time to time in a Company Order, all as
          contemplated by and in accordance with a Board

                                      -27-

<PAGE>
 
          Resolution or an Officers' Certificate pursuant to Section 3.1, as the
          case may be) will have been, established in conformity with the
          provisions of this Indenture; and

               (y) that such Securities together with the coupons, if any,
          appertaining thereto, when (1) executed by the Company, (2) completed,
          authenticated and delivered by the Trustee in accordance with this
          Indenture, and (3) issued by the Company in the manner and subject to
          any conditions specified in such Opinion of Counsel, will constitute
          valid and legally binding obligations of the Company, enforceable in
          accordance with their terms, subject to customary exceptions.

          With respect to Securities of a series subject to a Periodic Offering,
     the Trustee may conclusively rely, as to the authorization by the Company
     of any of such Securities, the form and terms thereof and the legality,
     validity, binding effect and enforceability thereof, upon the Opinion of
     Counsel and other documents delivered pursuant to Sections 2.1 and 3.1 of
     this Section, as applicable, at or prior to the time of the first
     authentication of Securities of such series unless and until it has
     received written notification that such opinion or other documents have
     been superseded or revoked.  In connection with the authentication and
     delivery of Securities of a series subject to a Periodic Offering, the
     Trustee shall be entitled to assume that the Company's instructions to
     authenticate and deliver such Securities do not violate any rules,
     regulations or orders of any governmental agency or commission having
     jurisdiction over the Company.

          If the form or terms of the Securities of a series have been
established by or pursuant to one or more Officers' Certificates as permitted by
Sections 2.1 and 3.1, the Trustee shall have the right to decline to
authenticate such Securities if the issue of such Securities pursuant to this
Indenture will adversely affect the Trustee's own rights, duties or immunities
under this Indenture or otherwise in a manner which is not reasonably acceptable
to the Trustee.  Notwithstanding the generality of the foregoing, the Trustee
will not be required to authenticate Securities denominated in a Foreign
Currency if the Trustee reasonably believes that it would be unable to perform
its duties with respect to such Securities.

          Notwithstanding the provisions of Section 3.1 and of the two preceding
paragraphs, if all of the Securities of any series are not to be issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required

                                      -28-

<PAGE>
 
pursuant to Section 3.1 at or prior to the time of the authentication of each
Security of such series if such Officers' Certificate is delivered at or prior
to the authentication upon original issuance of the first Security of such
series to be issued.

          If the Company shall establish pursuant to Section 3.1 that the
Securities of a series are to be issued in whole or in part in global form, then
the Company shall execute and the Trustee shall, in accordance with this Section
and the Company Order with respect to such series, authenticate and deliver one
or more Securities in global form that (i) shall represent and shall be
denominated in an amount equal to the aggregate principal amount of the
Outstanding Securities of such series to be represented by such Security or
Securities in global form, (ii) shall be registered, if a Registered Security,
in the name of the Depositary for such Security or Securities in global form or
the nominee of such Depositary and (iii) shall be delivered by the Trustee to
such Depositary or pursuant to such Depositary's instruction.

          Each Depositary designated pursuant to Section 3.1 for a Registered
Security in global form must, at the time of its designation and at all times
while it serves as Depositary, be a clearing agency registered under the
Securities Exchange Act of 1934 and any other applicable statute or regulation.
The Trustee shall have no responsibility to determine if the Depositary is so
registered.  Each Depositary shall enter into an agreement with the Trustee
governing the respective duties and rights of such Depositary and the Trustee
with regard to Securities issued in global form.

          Each Registered Security shall be dated the date of its authentication
and each Bearer Security (including a Bearer Security represented by a temporary
global Security) shall be dated as of the date specified as contemplated by
Section 3.1.

          No Security or coupon appertaining thereto shall be entitled to any
benefits under this Indenture or be valid or obligatory for any purpose until
such Security is authenticated by the manual signature of one of the authorized
signatories of the Trustee or an Authenticating Agent.  Such signature upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered under this Indenture and is entitled
to the benefits of this Indenture.  Except as permitted by Section 3.6 or 3.7,
the Trustee shall not authenticate and deliver any Bearer Security unless all
appurtenant coupons for interest then matured have been detached and cancelled.

                                      -29-

<PAGE>
 
          Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 3.9 together with a written statement (which need not comply
with Section 1.2 and need not be accompanied by an Opinion of Counsel) stating
that such Security has never been issued and sold by the Company, for all
purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall not be entitled to the benefits
of this Indenture.

          Section 3.4.  Temporary Securities.  Pending the preparation of
definitive Securities of any series, the Company may execute and, upon Company
Order, the Trustee shall authenticate and deliver temporary Securities of such
series which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor and form,
with or without coupons, of the definitive Securities in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Securities may determine, as
conclusively evidenced by their execution of such Securities and coupons, if
any.  In the case of Securities of any series, such temporary Securities may be
in global form.

          Except in the case of temporary Securities in global form, each of
which shall be exchanged in accordance with the provisions thereof, if temporary
Securities of any series are issued, the Company will cause permanent Securities
of such series to be prepared without unreasonable delay.  After preparation of
such permanent Securities, the temporary Securities shall be exchangeable for
such permanent Securities of like tenor upon surrender of the temporary
Securities of such series at the office or agency of the Company pursuant to
Section 9.2 in a Place of Payment for such series, without charge to the Holder.
Upon surrender for cancellation of any one or more temporary Securities of any
series (accompanied by any unmatured coupons appertaining thereto), the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of permanent Securities of the same series of
authorized denominations and of like tenor; provided, however, that no permanent
Bearer Security shall be delivered in exchange for a temporary Registered
Security; and provided further that no permanent Bearer Security shall be
delivered in exchange for a temporary Bearer Security unless the Trustee shall
have received from the person entitled to receive the definitive Bearer Security
a certificate substantially in the form approved in the Officers' Certificate
relating thereto and such delivery shall occur only outside the United States.
Until so exchanged, the temporary Securities of any series shall in all

                                      -30-

<PAGE>
 
respects be entitled to the same benefits under this Indenture as permanent
Securities of such series except as otherwise specified as contemplated by
Section 3.1.

          Section 3.5.  Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the Trustee
or in any office or agency to be maintained by the Company in accordance with
Section 9.2 in a Place of Payment a register (the "Register") in which, subject
to such reasonable regulations as it may prescribe, the Company shall provide
for the registration of Registered Securities and the registration of transfers
of Registered Securities.  The Register shall be in written form or any other
form capable of being converted into written form within a reasonable time.  The
Trustee is hereby appointed "Registrar" for the purpose of registering
Registered Securities and transfers of Registered Securities as herein provided.

          Upon surrender for registration of transfer of any Registered Security
of any series at the office or agency maintained pursuant to Section 9.2 in a
Place of Payment for that series, the Company shall execute, and the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Registered Securities of the same series, of any
authorized denominations and of a like aggregate principal amount and tenor.

          Bearer Securities or any coupons appertaining thereto shall be
transferable by delivery.

          At the option of the Holder, Registered Securities of any series
(except a Registered Security in global form) may be exchanged for other
Registered Securities of the same series, of any authorized denominations and of
a like aggregate principal amount containing identical terms and provisions,
upon surrender of the Registered Securities to be exchanged at such office or
agency.  Whenever any Registered Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Registered Securities which the Holder making the exchange is entitled to
receive.  Unless otherwise specified as contemplated by Section 3.1, Bearer
Securities may not be issued in exchange for Registered Securities.

          Unless otherwise specified as contemplated by Section 3.1, at the
option of the Holder, Bearer Securities of such series may be exchanged for
Registered Securities (if the Securities of such series are issuable in
registered form) or Bearer Securities (if Bearer Securities of such series are
issuable in more than one denomination and such exchanges are permitted by such
series) of the same series, of any authorized

                                      -31-

<PAGE>
 
denominations and of like tenor and aggregate principal amount, upon surrender
of the Bearer Securities to be exchanged at any such office or agency, with all
unmatured coupons and all matured coupons in default thereto appertaining.  If
the Holder of a Bearer Security is unable to produce any such unmatured coupon
or coupons or matured coupon or coupons in default, such exchange may be
effected if the Bearer Securities are accompanied by payment in funds acceptable
to the Company and the Trustee in an amount equal to the face amount of such
missing coupon or coupons, or the surrender of such missing coupon or coupons
may be waived by the Company and the Trustee if there be furnished to them such
security or indemnity as they may require to save each of them and any Paying
Agent harmless. If thereafter the Holder of such Security shall surrender to any
Paying Agent any such missing coupon in respect of which such a payment shall
have been made, such Holder shall be entitled to receive the amount of such
payment; provided, however, that, except as otherwise provided in Section 9.2,
interest represented by coupons shall be payable only upon presentation and
surrender of those coupons at an office or agency located outside the United
States.  Notwithstanding the foregoing, in case any Bearer Security of any
series is surrendered at any such office or agency in exchange for a Registered
Security of the same series after the close of business at such office or agency
on (i) any Regular Record Date and before the opening of business at such office
or agency on the relevant Interest Payment Date, or (ii) any Special Record Date
and before the opening of business at such office or agency on the related date
for payment of Defaulted Interest, such Bearer Security shall be surrendered
without the coupon relating to such Interest Payment Date or proposed date of
payment, as the case may be (or, if such coupon is so surrendered with such
Bearer Security, such coupon shall be returned to the person so surrendering the
Bearer Security), and interest or Defaulted Interest, as the case may be, will
not be payable on such Interest Payment Date or proposed date for payment, as
the case may be, in respect of the Registered Security issued in exchange for
such Bearer Security, but will be payable only to the Holder of such coupon,
when due in accordance with the provisions of this Indenture.

          Notwithstanding any other provision (other than the provisions set
forth in the seventh and eighth paragraphs of this Section) of this Section,
unless and until it is exchanged in whole or in part for Securities in
certificated form, a Security in global form representing all or a portion of
the Securities of a series may not be transferred except as a whole by the
Depositary for such series to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
such Depositary or any such nominee to a successor Depositary for such series or
a nominee of such successor Depositary.

                                      -32-

<PAGE>
 
          If at any time the Depositary for the Securities of a series notifies
the Company that it is unwilling or unable to continue as Depositary for the
Securities of such series or if at any time the Depositary for the Securities of
such series shall no longer be eligible under Section 3.3, the Company shall
appoint a successor Depositary with respect to the Securities of such series.
If a successor Depositary for the Securities of such series is not appointed by
the Company within 90 days after the issuer receives such notice or becomes
aware of such ineligibility, the Company's election pursuant to Section 3.1
shall no longer be effective with respect to the Securities of such series and
the Company shall execute, and the Trustee, upon receipt of a Company Order for
the authentication and delivery of certificated Securities of such series of
like tenor, shall authenticate and deliver Securities of such series of like
tenor in certificated form, in authorized denominations and in an aggregate
principal amount equal to the principal amount of the Security or Securities of
such series of like tenor in global form in exchange for such Security or
Securities in global form.

          The Company may at any time in its sole discretion determine that
Securities of a series issued in global form shall no longer be represented by
such a Security or Securities in global form.  In such event the Company shall
execute, and the Trustee, upon receipt of a Company Order for the authentication
and delivery of certificated Securities of such series of like tenor, shall
authenticate and deliver, Securities of such series of like tenor in
certificated form, in authorized denominations and in an aggregate principal
amount equal to the principal amount of the Security or Securities of such
series of like tenor in global form in exchange for such Security or Securities
in global form.

          If specified by the Company pursuant to Section 3.1 with respect to a
series of Securities, the Depositary for such series may surrender a Security in
global form of such series in exchange in whole or in part for Securities of
such series in certificated form on such terms as are acceptable to the Company
and such Depositary.  Thereupon, the Company shall execute, and the Trustee
shall authenticate and deliver, without service charge,

          (i) to each Person specified by such Depositary a new certificated
     Security or Securities of the same series of like tenor, of any authorized
     denomination as requested by such Person in aggregate principal amount
     equal to and in exchange for such Person's beneficial interest in the
     Security in global form; and

         (ii) to such Depositary a new Security in global form of like tenor in
     a denomination equal to the difference, if

                                      -33-

<PAGE>
 
     any, between the principal amount of the surrendered Security in global
     form and the aggregate principal amount of certificated Securities
     delivered to Holders thereof.

          Upon the exchange of a Security in global form for Securities in
certificated form, such Security in global form shall be cancelled by the
Trustee.  Unless expressly provided with respect to the Securities of any series
that such Security may be exchanged for Bearer Securities, Securities in
certificated form issued in exchange for a Security in global form pursuant to
this Section shall be registered in such names and in such authorized
denominations as the Depositary for such Security in global form, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee.  The Trustee shall deliver such Securities to the Persons
in whose names such Securities are so registered.

          Whenever any Securities are surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.

          All Securities issued upon any registration of transfer or upon any
exchange of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.

          Every Registered Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company, the Registrar or
the Trustee) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to those of the Company, the Registrar and the
Trustee requiring such written instrument of transfer duly executed by the
Holder thereof or his attorney duly authorized in writing.

          No service charge shall be made for any registration of transfer or
for any exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration or transfer or exchange of Securities, other
than exchanges pursuant to Section 3.4 or 10.7 not involving any transfer.

          The Company shall not be required (i) to issue, register the transfer
of, or exchange any Securities for a period beginning at the opening of business
15 days before any selection for redemption of Securities of like tenor and of
the series of which such Security is a part and ending at the close of business
on the earliest date on which the relevant notice of redemption

                                      -34-

<PAGE>
 
is deemed to have been given to all Holders of Securities of like tenor and of
such series to be redeemed; (ii) to register the transfer of or exchange any
Registered Security so selected for redemption, in whole or in part, except the
unredeemed portion of any Security being redeemed in part; or (iii) to exchange
any Bearer Security so selected for redemption, except that such a Bearer
Security may be exchanged for a Registered Security of that series and like
tenor; provided that such Registered Security shall be simultaneously
surrendered for redemption.

          Section 3.6.  Replacement Securities.  If a mutilated Security or a
Security with a mutilated coupon appertaining to it is surrendered to the
Trustee, together with, in proper cases, such security or indemnity as may be
required by the Company or the Trustee to save each of them harmless, the
Company shall execute and the Trustee shall authenticate and deliver a
replacement Registered Security, if such surrendered Security was a Registered
Security, or a replacement Bearer Security with coupons corresponding to the
coupons appertaining to the surrendered Security, if such surrendered Security
was a Bearer Security, of the same series and date of maturity, if the Trustee's
requirements are met.

          If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
or Security with a destroyed, lost or stolen coupon and (ii) such security or
indemnity as may be required by them to save each of them and any agent of
either of them harmless, then, in the absence of notice to the Company or the
Trustee that such Security or coupon has been acquired by a bona fide purchaser,
the Company shall execute and the Trustee shall authenticate and deliver in lieu
of any such destroyed, lost or stolen Security or in exchange for the Security
to which a destroyed, lost or stolen coupon appertains (with all appurtenant
coupons not destroyed, lost or stolen), a replacement Registered Security, if
such Holder's claim appertains to a Registered Security, or a replacement Bearer
Security with coupons corresponding to the coupons appertaining to the
destroyed, lost or stolen Bearer Security or the Bearer Security to which such
lost, destroyed or stolen coupon appertains, if such Holder's claim appertains
to a Bearer Security, of the same series and principal amount, containing
identical terms and provisions and bearing a number not contemporaneously
outstanding with coupons corresponding to the coupons, if any, appertaining to
the destroyed, lost or stolen Security.

          In case any such mutilated, destroyed, lost or stolen Security or
coupon has become or is about to become due and payable, the Company in its
discretion may, instead of issuing a new Security or coupon, pay such Security
or coupon; provided, however, that payment of principal of and any premium or
interest

                                      -35-

<PAGE>
 
on Bearer Securities shall, except as otherwise provided in Section 9.2, be
payable only at an office or agency located outside the United States and,
unless otherwise specified as contemplated by Section 3.1, any interest on
Bearer Securities shall be payable only upon presentation and surrender of the
coupons appertaining thereto.

          Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.

          Every new Security of any series with its coupons, if any, issued
pursuant to this Section in lieu of any destroyed, lost or stolen Security, or
in exchange for a Security to which a destroyed, lost or stolen coupon
appertains, shall constitute an original additional contractual obligation of
the Company, whether or not the destroyed, lost or stolen Security and its
coupon, if any, or the destroyed, lost or stolen coupon, shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Securities of that
series and their coupons, if any, duly issued hereunder.

          The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities or coupons.

          Section 3.7.  Payment of Interest; Interest Rights Preserved.  (a)
Unless otherwise provided as contemplated by Section 3.1, interest, if any, on
any Registered Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest at the office or
agency maintained for such purpose pursuant to Section 9.2; provided, however,
that, at the option of the Company, interest on any series of Registered
Securities that bear interest may be paid (i) by check mailed to the address of
the Person entitled thereto as it shall appear on the Register of Holders of
Securities of such series or (ii) to the extent specified as contemplated by
Section 3.1, by wire transfer to an account maintained by the Person entitled
thereto as specified in the Register of Holders of Securities of such series.

          Unless otherwise provided as contemplated by Section 3.1, (i)
interest, if any, on Bearer Securities shall be paid only against presentation
and surrender of the coupons for

                                      -36-

<PAGE>
 
such interest installments as are evidenced thereby as they mature and (ii)
original issue discount, if any, on Bearer Securities shall be paid only against
presentation and surrender of such Securities; in either case at the office of a
Paying Agent located outside the United States, unless the Company shall have
otherwise instructed the Trustee in writing provided that any such instruction
for payment in the United States does not cause any Bearer Security to be
treated as a "registration-required obligation" under the United States law and
regulations.  The interest, if any, on any temporary Bearer Security shall be
paid, as to any installment of interest evidenced by a coupon attached thereto
only upon presentation and surrender of such coupon and, as to other
installments of interest, only upon presentation of such Security for notation
thereon of the payment of such interest.  If at the time a payment of principal
of or interest, if any, on a Bearer Security or coupon shall become due, the
payment of the full amount so payable at the office or offices of all the Paying
Agents outside the United States is illegal or effectively precluded because of
the imposition of exchange controls or other similar restrictions on the payment
of such amount in Dollars, then the Company may instruct the Trustee to make
such payments at a Paying Agent located in the United States, provided that
provision for such payment in the United States would not cause such Bearer
Security to be treated as a "registration-required obligation" under the United
States law and regulations.

          (b) Unless otherwise provided as contemplated by Section 3.1, any
interest on any Registered Security of any series which is payable, but is not
punctually paid or duly provided for, on any interest payment date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in clause (1) or (2) below:

          (1) The Company may elect to make payment of any Defaulted Interest to
     the Persons in whose names the Registered Securities of such series (or
     their respective Predecessor Securities) are registered at the close of
     business on a Special Record Date for the payment of such Defaulted
     Interest, which shall be fixed in the following manner.  The Company shall
     deposit with the Trustee an amount of money equal to the aggregate amount
     proposed to be paid in respect of such Defaulted Interest or shall make
     arrangements satisfactory to the Trustee for such deposit prior to the date
     of the proposed payment, such money when deposited to be held in trust for
     the benefit of the Persons entitled to such Defaulted Interest as in this
     clause (1) provided.  Thereupon the Trustee shall fix a Special Record

                                      -37-

<PAGE>
 
     Date for the payment of such Defaulted Interest which shall be not more
     than 15 days and not less than 10 days prior to the date of the proposed
     payment and not less than 10 days after the receipt by the Trustee of the
     notice of the proposed payment.  The Trustee shall promptly notify the
     Company of such Special Record Date and, in the name and at the expense of
     the Company, shall cause notice of the proposed payment of such Defaulted
     Interest and the Special Record Date therefor to be mailed, first-class
     postage prepaid, to each Holder of Registered Securities of such series at
     his address as it appears in the Register, not less than 10 days prior to
     such Special Record Date.  Notice of the proposed payment of such Defaulted
     Interest and the Special Record Date therefor having been so mailed, such
     Defaulted Interest shall be paid to the Persons in whose names the
     Securities of such series (or their respective Predecessor Securities) are
     registered at the close of business on such Special Record Date and shall
     no longer be payable pursuant to the following clause (2).

          (2) The Company may make payment of any Defaulted Interest to the
     Persons in whose names the Registered Securities of such series (or their
     respective Predecessor Securities) are registered at the close of business
     on a specified date in any other lawful manner not inconsistent with the
     requirements of any securities exchange on which such Securities may be
     listed, and upon such notice as may be required by such exchange, if, after
     notice given by the Company to the Trustee of the proposed payment pursuant
     to this clause (2), such manner of payment shall be deemed practicable by
     the Trustee.

          (c) Subject to the foregoing provisions of this Section and Section
3.5, each Security delivered under this Indenture upon registration of transfer
of or in exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.

          Section 3.8.  Persons Deemed Owners.  Prior to due presentment of any
Registered Security for registration of transfer, the Company, the Trustee and
any agent of the Company or the Trustee may treat the Person in whose name such
Registered Security is registered as the owner of such Registered Security for
the purpose of receiving payment of principal of, premium, if any, and (subject
to Section 3.7) interest on such Registered Security and for all other purposes
whatsoever, whether or not such Registered Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.

                                      -38-

<PAGE>
 
          The Company, the Trustee and any agent of the Company or the Trustee
may treat the bearer of any Bearer Security and the bearer of any coupon as the
absolute owner of such Bearer Security or coupon for the purpose of receiving
payment thereof or on account thereof and for all other purposes whatsoever,
whether or not such Bearer Security or coupon be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.

          None of the Company, the Trustee or any agent of the Company or the
Trustee shall have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests of a
Security in global form, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.  Notwithstanding the
foregoing, with respect to any Security in global form, nothing herein shall
prevent the Company or the Trustee, or any agent of the Company or the Trustee,
from giving effect to any written certification, proxy or other authorization
furnished by any Depositary (or its nominee), as a Holder, with respect to such
Security in global form or impair, as between such Depositary and owners of
beneficial interests in such Security in global form, the operation of customary
practices governing the exercise of the rights of such Depositary (or its
nominee) as Holder of such Security in global form.

          Section 3.9.  Cancellation.  The Company at any time may deliver
Securities and coupons to the Trustee for cancellation.  The Registrar and any
Paying Agent shall forward to the Trustee any Securities and coupons surrendered
to them for replacement, for registration of transfer, or for exchange or
payment.  The Trustee shall cancel all Securities and coupons surrendered for
replacement, for registration of transfer, or for exchange, payment, redemption
or cancellation and may dispose of cancelled Securities and coupons and issue a
certificate of destruction to the Company.  The Company may not issue new
Securities to replace Securities that it has paid or delivered to the Trustee
for cancellation, except as expressly permitted in the terms of Securities for
any particular series or as permitted pursuant to the terms of this Indenture.

          Section 3.10.  Computation of Interest.  Except as otherwise specified
as contemplated by Section 3.1, (i) interest on any Securities that bear
interest at a fixed rate shall be computed on the basis of a 360-day year of
twelve 30-day months and, for any period shorter than a full calendar month, on
the basis of the actual number of days elapsed in such period, and (ii) interest
on any Securities that bear interest at a variable rate shall be computed on the
basis of the actual number of days in an interest period divided by 360 or the
actual number of days in the year.

                                      -39-

<PAGE>
 
          Section 3.11.  Currency and Manner of Payment in Respect of
Securities.  (a)  Unless otherwise specified with respect to any Securities
pursuant to Section 3.1, with respect to Registered Securities of any series not
permitting the election provided for in paragraph (b) below or the Holders of
which have not made the election provided for in paragraph (b) below, and with
respect to Bearer Securities of any series, except as provided in paragraph (d)
below, payment of the principal of, premium, if any, and interest, if any, on
any Registered or Bearer Security of such series will be made in the currency or
currencies or currency unit or units in which such Registered Security or Bearer
Security, as the case may be, is payable.  The provisions of this Section 3.11
may be modified or superseded pursuant to Section 3.1 with respect to any
Securities.  For all purposes of this Indenture, currency units shall include
any composite currency.

          (b) It may be provided pursuant to Section 3.1, with respect to
Registered Securities of any series, that Holders shall have the option, subject
to paragraphs (d) and (e) below, to receive payments of principal of, premium,
if any, or interest, if any, on such Registered Securities in any of the
currencies or currency units which may be designated for such election by
delivering to the Trustee (or the applicable Paying Agent) a written election
with signature guarantees and in the applicable form established pursuant to
Section 3.1, not later than the close of business on the Election Date
immediately preceding the applicable payment date.  If a Holder so elects to
receive such payments in any such currency or currency unit, such election will
remain in effect for such Holder or any transferee of such Holder until changed
by such Holder or such transferee by written notice to the Trustee (or any
applicable Paying Agent) for such series of Registered Securities (but any such
change must be made not later than the close of business on the Election Date
immediately preceding the next payment date to be effective for the payment to
be made on such payment date, and no such change of election may be made with
respect to payments to be made on any Registered Security of such series with
respect to which an Event of Default has occurred or with respect to which the
Company has deposited funds pursuant to Article 4 or with respect to which a
notice of redemption has been given by the Company).  Any Holder of any such
Registered Security who shall not have delivered any such election to the
Trustee (or any applicable Paying Agent) not later than the close of business on
the applicable Election Date will be paid the amount due on the applicable
payment date in the relevant currency or currency unit as provided in Section
3.11(a).  The Trustee (or the applicable Paying Agent) shall notify the Exchange
Rate Agent as soon as practicable after the Election Date of the aggregate
principal amount of Registered Securities for which Holders have made such
written election.

                                      -40-

<PAGE>
 
          (c) If the election referred to in paragraph (b) above has been
provided for with respect to any Registered Securities of a series pursuant to
Section 3.1, then, unless otherwise specified pursuant to Section 3.1 with
respect to any such Registered Securities, not later than the fourth Business
Day after the Election Date for each payment date for such Registered
Securities, the Exchange Rate Agent will deliver to the Company a written notice
specifying, in the currency or currencies or currency unit or units in which
Registered Securities of such series are payable, the respective aggregate
amounts of principal of, premium, if any, and interest, if any, on such
Registered Securities to be paid on such payment date, and specifying the
amounts in such currency or currencies or currency unit or units so payable in
respect of such Registered Securities as to which the Holders of Registered
Securities denominated in any currency or currencies or currency unit or units
shall have elected to be paid in another currency or currency unit as provided
in paragraph (b) above.  If the election referred to in paragraph (b) above has
been provided for with respect to any Registered Securities of a series pursuant
to Section 3.1, and if at least one Holder has made such election, then, unless
otherwise specified pursuant to Section 3.1, on the second Business Day
preceding such payment date the Company will deliver to the Trustee (or the
applicable Paying Agent) an Exchange Rate Officers' Certificate in respect of
the Dollar, Foreign Currency or Currencies, ECU or other currency unit payments
to be made on such payment date.  Unless otherwise specified pursuant to Section
3.1, the Dollar, Foreign Currency or Currencies, ECU or other currency unit
amount receivable by Holders of Registered Securities who have elected payment
in a currency or currency unit as provided in paragraph (b) above shall be
determined by the Company on the basis of the applicable Market Exchange Rate in
effect on the second Business Day (the "Valuation Date") immediately preceding
each payment date, and such determination shall be conclusive and binding for
all purposes, absent manifest error.

          (d) If a Conversion Event occurs with respect to a Foreign Currency,
ECU or any other currency unit in which any of the Securities are denominated or
payable otherwise than pursuant to an election provided for pursuant to
paragraph (b) above, then, with respect to each date for the payment of
principal of, premium, if any, and interest, if any, on the applicable
Securities denominated or payable in such Foreign Currency, ECU or such other
currency unit occurring after the last date on which such Foreign Currency, ECU
or such other currency unit was used (the "Conversion Date"), the Dollar shall
be the currency of payment for use on each such payment date (but such Foreign
Currency, ECU or such other currency unit that was previously the currency of
payment shall, at the Company's election, resume being the currency of payment
on the first such payment date

                                      -41-

<PAGE>
 
preceded by 15 Business Days during which the circumstances which gave rise to
the Dollar becoming such currency no longer prevail).  Unless otherwise
specified pursuant to Section 3.1, the Dollar amount to be paid by the Company
to the Trustee or any applicable Paying Agent and by the Trustee or any
applicable Paying Agent to the Holders of such Securities with respect to such
payment date shall be, in the case of a Foreign Currency other than a currency
unit, the Dollar Equivalent of the Foreign Currency or, in the case of a Foreign
Currency that is a currency unit, the Dollar Equivalent of the Currency Unit, in
each case as determined by the Exchange Rate Agent in the manner provided in
paragraph (f) or (g) below.

          (e) Unless otherwise specified pursuant to Section 3.1, if the Holder
of a Registered Security denominated in any currency or currency unit shall have
elected to be paid in another currency or currency unit or in other currencies
as provided in paragraph (b) above, and (i) a Conversion Event occurs with
respect to any such elected currency or currency unit, such Holder shall receive
payment in the currency or currency unit in which payment would have been made
in the absence of such election and (ii) if a Conversion Event occurs with
respect to the currency or currency unit in which payment would have been made
in the absence of such election, such Holder shall receive payment in Dollars as
provided in paragraph (d) of this Section 3.11 (but, subject to any contravening
valid election pursuant to paragraph (b) above, the elected payment currency or
currency unit, in the case of the circumstances described in clause (i) above,
or the payment currency or currency unit in the absence of such election, in the
case of the circumstances described in clause (ii) above, shall, at the
Company's election, resume being the currency or currency unit of payment with
respect to Holders who have so elected, but only with respect to payments on
payment dates preceded by 15 Business Days during which the circumstances which
gave rise to such currency or currency unit, in the case of the circumstances
described in clause (i) above, or the Dollar, in the case of the circumstances
described in clause (ii) above, becoming the currency or currency unit, as
applicable, of payment, no longer prevail).

          (f) The "Dollar Equivalent of the Foreign Currency" shall be
determined by the Exchange Rate Agent and shall be obtained for each subsequent
payment date by the Exchange Rate Agent by converting the specified Foreign
Currency into Dollars at the Market Exchange Rate on the Conversion Date.

          (g) The "Dollar Equivalent of the Currency Unit" shall be determined
by the Exchange Rate Agent and, subject to the provisions of paragraph (h)
below, shall be the sum of each amount obtained by converting the Specified
Amount of each

                                      -42-

<PAGE>
 
Component Currency (as each such term is defined in paragraph (h) below) into
Dollars at the Market Exchange Rate for such Component Currency on the Valuation
Date with respect to each payment.

          (h) For purposes of this Section 3.11 the following terms shall have
the following meanings:

          A "Component Currency" shall mean any currency which, on the
Conversion Date, was a component currency of the relevant currency unit,
including, but not limited to, ECU.

          "Election Date" shall mean the Regular Record Date for the applicable
series of Registered Securities as specified pursuant to Section 3.1 by which
the written election referred to in Section 3.11(b) may be made.

          A "Specified Amount" of a Component Currency shall mean the number of
units of such Component Currency or fractions thereof which such Component
Currency represented in the relevant currency unit, including, but not limited
to, ECU, on the Conversion Date.  If after the Conversion Date the official unit
of any Component Currency is altered by way of combination or subdivision, the
Specified Amount of such Component Currency shall be divided or multiplied in
the same proportion.  If after the Conversion Date two or more Component
Currencies are consolidated into a single currency, the respective Specified
Amounts of such Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the respective Specified Amounts of such
consolidated Component Currencies expressed in such single currency, and such
amount shall thereafter be a Specified Amount and such single currency shall
thereafter be a Component Currency.  If after the Conversion Date any Component
Currency shall be divided into two or more currencies, the Specified Amount of
such Component Currency shall be replaced by specified amounts of such two or
more currencies, the sum of which, at the Market Exchange Rate of such two or
more currencies on the date of such replacement, shall be equal to the Specified
Amount of such former Component Currency and such amounts shall thereafter be
Specified Amounts and such currencies shall thereafter be Component Currencies.
If, after the Conversion Date of the relevant currency unit, including, but not
limited to, ECU, a Conversion Event (other than any event referred to above in
this definition of "Specified Amount") occurs with respect to any Component
Currency of such currency unit and is continuing on the applicable Valuation
Date, the Specified Amount of such Component Currency shall, for purposes of
calculating the Dollar Equivalent of the Currency Unit, be converted into
Dollars at the Market Exchange Rate in effect on the Conversion Date of such
Component Currency.

                                      -43-

<PAGE>
 
          All decisions and determinations of the Exchange Rate Agent regarding
the Dollar Equivalent of the Foreign Currency, the Dollar Equivalent of the
Currency Unit, the Market Exchange Rate and changes in the Specified Amounts as
specified above shall be in its sole discretion and shall, in the absence of
manifest error, be conclusive for all purposes and irrevocably binding upon the
Company, the Trustee (and any applicable Paying Agent) and all Holders of
Securities denominated or payable in the relevant currency, currencies or
currency units.  The Exchange Rate Agent shall promptly give written notice to
the Company and the Trustee of any such decision or determination.

          In the event that the Company determines in good faith that a
Conversion Event has occurred with respect to a Foreign Currency, the Company
will promptly give written notice thereof to the Trustee (or any applicable
Paying Agent) and to the Exchange Rate Agent (and the Trustee (or such Paying
Agent) will promptly thereafter give notice in the manner provided in Section
1.6 to the affected Holders) specifying the Conversion Date.  In the event the
Company so determines that a Conversion Event has occurred with respect to ECU
or any other currency unit in which Securities are denominated or payable, the
Company will promptly give written notice thereof to the Trustee (or any
applicable Paying Agent) and to the Exchange Rate Agent (and the Trustee (or
such Paying Agent) will promptly thereafter give notice in the manner provided
in Section 1.6 to the affected Holders) specifying the Conversion Date and the
Specified Amount of each Component Currency on the Conversion Date.  In the
event the Company determines in good faith that any subsequent change in any
Component Currency as set forth in the definition of Specified Amount above has
occurred, the Company will similarly give written notice to the Trustee (or any
applicable Paying Agent) and to the Exchange Rate Agent.

          The Trustee of the appropriate series of Securities shall be fully
justified and protected in relying and acting upon information received by it
from the Company and the Exchange Rate Agent and shall not otherwise have any
duty or obligation to determine the accuracy or validity of such information
independent of the Company or the Exchange Rate Agent.

          Section 3.12.  Appointment and Resignation of Exchange Rate Agent.
(a)  Unless otherwise specified pursuant to Section 3.1, if and so long as the
Securities of any series (i) are denominated in a currency other than Dollars or
(ii) may be payable in a currency other than Dollars, or so long as it is
required under any other provision of this Indenture, then the Company will
maintain with respect to each such series of Securities, or as so required, at
least one Exchange Rate Agent.  The Company will cause the Exchange Rate Agent
to make the necessary foreign exchange determinations at the time and in the

                                      -44-

<PAGE>
 
manner specified pursuant to Section 3.11 for the purpose of determining the
applicable rate of exchange and, if applicable, for the purpose of converting
the issued currency or currencies or currency unit or units into the applicable
payment currency or currency unit for the payment of principal, premium, if any,
and interest, if any, pursuant to Section 3.11.

          (b) No resignation of the Exchange Rate Agent and no appointment of a
successor Exchange Rate Agent pursuant to this Section shall become effective
until the acceptance of appointment by the successor Exchange Rate Agent as
evidenced by a written instrument delivered to the Company and the Trustee of
the appropriate series of Securities accepting such appointment executed by the
successor Exchange Rate Agent.

          (c) If the Exchange Rate Agent shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Exchange
Rate Agent for any cause, with respect to the Securities of one or more series,
the Company, by or pursuant to a Board Resolution, shall promptly appoint a
successor Exchange Rate Agent or Exchange Rate Agents with respect to the
Securities of that or those series (it being understood that any such successor
Exchange Rate Agent may be appointed with respect to the Securities of one or
more or all of such series and that, unless otherwise specified pursuant to
Section 3.1, at any time there shall only be one Exchange Rate Agent with
respect to the Securities of any particular series that are originally issued by
the Company on the same date and that are initially denominated and/or payable
in the same currency or currencies or currency unit or units).

          Section 3.13.  CUSIP Numbers.  The Company in issuing the Securities
may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee
shall use "CUSIP" numbers (in addition to the other identification numbers
printed on the Securities) in notices of redemption as a convenience to Holders;
provided that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers.

                                   ARTICLE 4

                     Satisfaction, Discharge and Defeasance
                     --------------------------------------

          Section 4.1.   Termination of Company's Obligations Under the
Indenture.  Except as otherwise provided as contemplated by Section 3.1, this
Indenture shall upon Company Request cease to be of further effect with respect
to Securities

                                      -45-

<PAGE>
 
of or within any series and any coupons appertaining thereto (except as to any
surviving rights of registration of transfer or exchange of such Securities and
replacement of such Securities which may have been lost, stolen or mutilated as
herein expressly provided for) and the Trustee, at the expense of the Company
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture with respect to such Securities and any coupons appertaining
thereto when

          (1)  either

               (A) all such Securities previously authenticated and delivered
          and all coupons appertaining thereto (other than (i) such coupons
          appertaining to Bearer Securities surrendered in exchange for
          Registered Securities and maturing after such exchange, surrender of
          which is not required or has been waived as provided in Section 3.5,
          (ii) such Securities and coupons which have been destroyed, lost or
          stolen and which have been replaced or paid as provided in Section
          3.6, (iii) such coupons appertaining to Bearer Securities called for
          redemption and maturing after the relevant Redemption Date, surrender
          of which has been waived as provided in Section 10.6 and (iv) such
          Securities and coupons for whose payment money has theretofore been
          deposited in trust or segregated and held in trust by the Company and
          thereafter repaid to the Company or discharged from such trust, as
          provided in Section 9.3) have been delivered to the Trustee for
          cancellation; or

               (B) all Securities of such series and, in the case of (i) or (ii)
          below, any coupons appertaining thereto not theretofore delivered to
          the Trustee for cancellation

                    (i)  have become due and payable, or

                   (ii)  will become due and payable at their Stated Maturity
               within one year, or

                  (iii)  if redeemable at the option of the Company, are to be
               called for redemption within one year under arrangements
               satisfactory to the Trustee for the giving of notice of
               redemption by the Trustee in the name, and at the expense of the
               Company,

          and the Company, in the case of (i), (ii) or (iii) above, has
          irrevocably deposited or caused to be deposited with the Trustee as
          trust funds in trust for the purpose an amount in the currency or
          currencies or

                                      -46-

<PAGE>
 
          currency unit or units in which the Securities of such series are
          payable, sufficient to pay and discharge the entire indebtedness on
          such Securities and such coupons not theretofore delivered to the
          Trustee for cancellation, for principal, premium, if any, and
          interest, with respect thereto, to the date of such deposit (in the
          case of Securities which have become due and payable) or to the Stated
          Maturity or Redemption Date, as the case may be;

          (2) the Company has paid or caused to be paid all other sums payable
     hereunder by the Company; and

          (3) the Company has delivered to the Trustee an Officers' Certificate
     and an Opinion of Counsel, each stating that all conditions precedent
     herein provided for relating to the satisfaction and discharge of this
     Indenture as to such series have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the obligation
of the Company to the Trustee and any predecessor Trustee under Section 6.9, the
obligations of the Company to any Authenticating Agent under Section 6.14 and,
if money shall have been deposited with the Trustee pursuant to subclause (B) of
clause (1) of this Section, the obligations of the Trustee under Section 4.2 and
the last paragraph of Section 9.3 shall survive.

          Section 4.2.  Application of Trust Funds.  Subject to the provisions
of the last paragraph of Section 9.3, all money deposited with the Trustee
pursuant to Section 4.1 shall be held in trust and applied by it, in accordance
with the provisions of the Securities, the coupons and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal, premium, if any, and any interest for whose
payment such money has been deposited with or received by the Trustee, but such
money need not be segregated from other funds except to the extent required by
law.

          Section 4.3.  Applicability of Defeasance Provisions; Company's Option
to Effect Defeasance or Covenant Defeasance.  If pursuant to Section 3.1
provision is made for either or both of (i) defeasance of the Securities of or
within a series under Section 4.4 or (ii) covenant defeasance of the Securities
of or within a series under Section 4.5, then the provisions of such Section or
Sections, as the case may be, together with the provisions of Sections 4.6
through 4.9 inclusive, with such modifications thereto as may be specified
pursuant to Section 3.1 with respect to any Securities, shall be applicable to
such Securities and any coupons appertaining thereto, and the Company

                                      -47-

<PAGE>
 
may at its option by Board Resolution, at any time, with respect to such
Securities and any coupons appertaining thereto, elect to have Section 4.4 (if
applicable) or Section 4.5 (if applicable) be applied to such Outstanding
Securities and any coupons appertaining thereto upon compliance with the
conditions set forth below in this Article.

          Section 4.4.  Defeasance and Discharge.  Upon the Company's exercise
of the option specified in Section 4.3 applicable to this Section with respect
to the Securities of or within a series, the Company shall be deemed to have
been discharged from its obligations with respect to such Securities and any
coupons appertaining thereto on the date the conditions set forth in Section 4.6
are satisfied (hereinafter "defeasance").  For this purpose, such defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by such Securities and any coupons appertaining thereto
which shall thereafter be deemed to be "Outstanding" only for the purposes of
Section 4.7 and the other Sections of this Indenture referred to in clause (ii)
of this Section, and to have satisfied all its other obligations under such
Securities and any coupons appertaining thereto and this Indenture insofar as
such Securities and any coupons appertaining thereto are concerned (and the
Trustee, at the expense of the Company, shall on Company Order execute proper
instruments acknowledging the same), except the following which shall survive
until otherwise terminated or discharged hereunder: (i) the rights of Holders of
such Securities and any coupons appertaining thereto to receive, solely from the
trust funds described in Section 4.6(a) and as more fully set forth in such
Section, payments in respect of the principal of, premium if any, and interest,
if any, on such Securities or any coupons appertaining thereto when such
payments are due; (ii) the Company's obligations with respect to such Securities
under Sections 3.5, 3.6, 9.2 and 9.3 and with respect to the payment of
additional amounts if any, payable with respect to such Securities as specified
pursuant to Section 3.l(b)(16); (iii) the rights, powers, trusts, duties and
immunities of the Trustee hereunder; and (iv) this Article 4.  Subject to
compliance with this Article 4, the Company may exercise its option under this
Section notwithstanding the prior exercise of its option under Section 4.5 with
respect to such Securities and any coupons appertaining thereto.  Following a
defeasance, payment of such Securities may not be accelerated because of an
Event of Default.

          Section 4.5.  Covenant Defeasance.  Upon the Company's exercise of the
option specified in Section 4.3 applicable to this Section with respect to any
Securities of or within a series, the Company shall be released from its
obligations under Article 7 and Sections 9.4 and 9.5, and, if specified pursuant
to Section 3.1, its obligations under any other covenant, with

                                      -48-

<PAGE>
 
respect to such Securities and any coupons appertaining thereto on and after the
date the conditions set forth in Section 4.6 are satisfied (hereinafter,
"covenant defeasance"), and such Securities and any coupons appertaining thereto
shall thereafter be deemed to be not "Outstanding" for the purposes of any
direction, waiver, consent or declaration or Act of Holders (and the
consequences of any thereof) in connection with Article 7 and Sections 9.4 and
9.5, or such other covenant, but shall continue to be deemed "Outstanding" for
all other purposes hereunder.  For this purpose, such covenant defeasance means
that, with respect to such Securities and any coupons appertaining thereto, the
Company may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such Section or such other
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such Section or such other covenant or by reason of reference in
any such Section or such other covenant to any other provision herein or in any
other document and such omission to comply shall not constitute a Default or an
Event of Default under Section 5.1(3) or 5.1(5) or otherwise, as the case may
be, but, except as specified above, the remainder of this Indenture and such
Securities and any coupons appertaining thereto shall be unaffected thereby.

          Section 4.6.  Conditions to Defeasance or Covenant Defeasance.  The
following shall be the conditions to application of Section 4.4 or Section 4.5
to any Securities of or within a series and any coupons appertaining thereto:

          (a) The Company shall have deposited or caused to be deposited
     irrevocably with the Trustee (or another trustee satisfying the
     requirements of Section 6.11 who shall agree to comply with, and shall be
     entitled to the benefits of, the provisions of Sections 4.3 through 4.9
     inclusive and the last paragraph of Section 9.3 applicable to the Trustee,
     for purposes of such Sections also a "Trustee") as trust funds in trust for
     the purpose of making the payments referred to in clauses (x) and (y) of
     this Section 4.6(a), specifically pledged as security for, and dedicated
     solely to, the benefit of the Holders of such Securities and any coupons
     appertaining thereto, with instructions to the Trustee as to the
     application thereof, (A) money in an amount (in such currency, currencies
     or currency unit in which such Securities and any coupons appertaining
     thereto are then specified as payable at Maturity), or (B) if Securities of
     such series are not subject to repayment at the option of Holders,
     Government Obligations which through the payment of interest and principal
     in respect thereof in accordance with their terms will provide, not later
     than one day before the due date of any payment referred to in clause (x)
     or (y) of this Section 4.6(a), money in an amount or (C) a combination

                                      -49-

<PAGE>
 
     thereof in an amount, sufficient, in the opinion of a nationally recognized
     firm of independent certified public accountants expressed in a written
     certification thereof delivered to the Trustee, to pay and discharge, and
     which shall be applied by the Trustee to pay and discharge, (x) the
     principal of, premium, if any, and interest, if any, on such Securities and
     any coupons appertaining thereto on the Maturity of such principal or
     installment of principal or interest and (y) any mandatory sinking fund
     payments applicable to such Securities on the day on which such payments
     are due and payable in accordance with the terms of this Indenture and such
     Securities and any coupons appertaining thereto.  Before such a deposit the
     Company may make arrangements satisfactory to the Trustee for the
     redemption of Securities at a future date or dates in accordance with
     Article 10 which shall be given effect in applying the foregoing.

          (b) Such defeasance or covenant defeasance shall not result in a
     breach or violation of, or constitute a Default or Event of Default under,
     this Indenture or result in a breach or violation of, or constitute a
     default under, any other material agreement or instrument to which the
     Company is a party or by which it is bound.

          (c) No Default or Event of Default under Section 5.1(4) or 5.1(5) with
     respect to such Securities and any coupons appertaining thereto shall have
     occurred and be continuing during the period commencing on the date of such
     deposit and ending on the 91st day after such date (it being understood
     that this condition shall not be deemed satisfied until the expiration of
     such period).

          (d) In the case of an election under Section 4.4, the Company shall
     have delivered to the Trustee an Officers' Certificate and an Opinion of
     Counsel to the effect that (i) the Company has received from, or there has
     been published by, the Internal Revenue Service a ruling, or (ii) since the
     date of execution of this Indenture, there has been a change in the
     applicable Federal income tax law, in either case to the effect that, and
     based thereon such opinion shall confirm that, the Holders of such
     Securities and any coupons appertaining thereto will not recognize income,
     gain or loss for Federal income tax purposes as a result of such defeasance
     and will be subject to Federal income tax on the same amount and in the
     same manner and at the same times, as would have been the case if such
     deposit, defeasance and discharge had not occurred.

          (e) In the case of an election under Section 4.5, the Company shall
     have delivered to the Trustee an Opinion of

                                      -50-

<PAGE>
 
     Counsel to the effect that the Holders of such Securities and any coupons
     appertaining thereto will not recognize income, gain or loss for Federal
     income tax purposes as a result of such covenant defeasance and will be
     subject to Federal income tax on the same amounts, in the same manner and
     at the same times as would have been the case if such covenant defeasance
     had not occurred.

          (f) The Company shall have delivered to the Trustee an Officers'
     Certificate and an Opinion of Counsel, each stating that all conditions
     precedent to the defeasance under Section 4.4 or the covenant defeasance
     under Section 4.5 (as the case may be) have been complied with and an
     Opinion of Counsel to the effect that either (i) as a result of a deposit
     pursuant to subsection (a) above and the, related exercise of the Company's
     option under Section 4.4 or Section 4.5 (as the case may be), registration
     is not required under the Investment Company Act of 1940, as amended, by
     the Company, with respect to the trust funds representing such deposit or
     by the trustee for such trust funds or (ii) all necessary registrations
     under said act have been effected.

          (g) Such defeasance or covenant defeasance shall be effected in
     compliance with any additional or substitute terms, conditions or
     limitations which may be imposed on the Company in connection therewith as
     contemplated by Section 3.1.

          Section 4.7.  Deposited Money and Government Obligations to Be Held in
Trust.  Subject to the provisions of the last paragraph of Section 9.3, all
money and Government Obligations (or other property as may be provided pursuant
to Section 3.1) (including the proceeds thereof) deposited with the Trustee
pursuant to Section 4.6 in respect of any Securities of any series and any
coupons appertaining thereto shall be held in trust and applied by the Trustee,
in accordance with the provisions of such Securities and any coupons
appertaining thereto and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as its own Paying Agent)
as the Trustee may determine, to the Holders of such Securities and any coupons
appertaining thereto of all sums due and to become due thereon in respect of
principal, premium, if any, and interest, if any, but such money need not be
segregated from other funds except to the extent required by law.

          Unless otherwise specified with respect to any Security pursuant to
Section 3.1, if, after a deposit referred to in Section 4.6(a) has been made,
(i) the Holder of a Security in respect of which such deposit was made is
entitled to, and does, elect pursuant to Section 3.11(b) or the terms of such
Security

                                      -51-

<PAGE>
 
to receive payment in a currency or currency unit other than that in which the
deposit pursuant to Section 4.6(a) has been made in respect of such Security, or
(ii) a Conversion Event occurs as contemplated in Section 3.11(d) or 3.11(e) or
by the terms of any Security in respect of which the deposit pursuant to Section
4.6(a) has been made, the indebtedness represented by such Security and any
coupons appertaining thereto shall be deemed to have been, and will be, fully
discharged and satisfied through the payment of the principal of, premium, if
any, and interest, if any, on such Security as the same becomes due out of the
proceeds yielded by converting (from time to time as specified below in the case
of any such election) the amount or other property deposited in respect of such
Security into the currency or currency unit in which such Security becomes
payable as a result of such election or Conversion Event based on the applicable
Market Exchange Rate for such currency or currency unit in effect on the second
Business Day prior to each payment date, except in the case of a Conversion
Event with respect to such currency or currency unit which is in effect (as
nearly as feasible) at the time of the Conversion Event.

          Section 4.8.  Transfers and Distribution at Company Request.  To the
extent permitted by the Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 76, as amended or interpreted by the
Financial Accounting Standards Board from time to time, or any successor thereto
("Standard No. 76"), or to the extent permitted by the Commission, the Trustee
shall, from time to time, take one or more of the following actions as specified
in a Company Request:

          (a) Retransfer, reassign and deliver to the Company any securities
     deposited with the Trustee pursuant to Section 4.6(a), provided that the
     Company shall in substitution therefor, simultaneously transfer, assign and
     deliver to the Trustee other Government Obligations appropriate to satisfy
     the Company's obligations in respect of the relevant Securities; and

          (b) The Trustee (and any Paying Agent) shall promptly pay to the
     Company upon Company Request, any excess money or securities held by them
     at any time, including, without limitation, any assets deposited with the
     Trustee pursuant to Section 4.6(a) exceeding those necessary for the
     purposes of Section 4.6(a).

The Trustee shall not take the actions described in subsections (a) and (b) of
this Section 4.8 unless it shall have first received a written report of Arthur
Andersen LLP, or another nationally recognized independent public accounting
firm, (i) expressing their opinion that the contemplated action is permitted by
Standard No. 76 or the Commission, for transactions

                                      -52-

<PAGE>
 
accounted for as extinguishment of debt under the circumstances described in
paragraph 3.c of Standard No. 76 or any successor provision, and (ii) verifying
the accuracy, after giving effect to such action or actions, of the computations
which demonstrate that the amounts remaining to be earned on the Government
Obligations deposited with the Trustee pursuant to Section 4.6(a) will be
sufficient for purposes of Section 4.6(a).


                                   ARTICLE 5

                             Defaults and Remedies
                             ---------------------

          Section 5.1.  Events of Default.  An "Event of Default" occurs with
respect to the Securities of any series if (whatever the reason for such Event
of Default and whether it shall be occasioned by the provisions of Article 12 or
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):

          (1) the Company defaults in the payment of interest on any Security of
     that series or any coupon appertaining thereto or any additional amount
     payable with respect to any Security of that series as specified pursuant
     to Section 3.1(b)(16) when the same becomes due and payable and such
     default continues for a period of 30 days;

          (2) the Company defaults in the payment of the principal of or any
     premium on any Security of that series when the same becomes due and
     payable at its Maturity or on redemption or otherwise, or in the payment of
     a mandatory sinking fund payment when and as due by the terms of the
     Securities of that series, and in each case such default continues for a
     period of ten days;

          (3) the Company defaults in the performance of, or breaches, any
     covenant or warranty of the Company in this Indenture, with respect to any
     Security of that series (other than a covenant or warranty a default in
     whose performance or whose breach is elsewhere in this Section specifically
     dealt with), and such default or breach continues for a period of 60 days
     after there has been given, by registered or certified mail, to the Company
     by the Trustee or to the Company and the Trustee by the Holders of at least
     25% in principal amount of the Outstanding Securities of that series, a
     written notice specifying such default or breach and requiring it to be
     remedied and stating that such notice is a "Notice of Default" hereunder;

                                      -53-

<PAGE>
 
          (4) the Company pursuant to or within the meaning of any Bankruptcy 
     Law (A) commences a voluntary case, (B) consents to the entry of an order
     for relief against it in an involuntary case, (C) consents to the
     appointment of a Custodian of it or for all or substantially all of its
     property, or (D) makes a general assignment for the benefit of its
     creditors;

          (5) a court of competent jurisdiction enters an order or decree under
     any Bankruptcy Law that (A) is for relief against the Company in an
     involuntary case, (B) appoints a Custodian of the Company for all or
     substantially all of its property, or (C) orders the liquidation of the
     Company; and the order or decree remains unstayed and in effect for 90
     days; or

          (6) any other Event of Default provided as contemplated by Section 3.1
     with respect to Securities of that series.

          The term "Bankruptcy Law" means Title 11, U.S. Code, or any similar
federal or state law for the relief of debtors.  The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.

          Section 5.2.  Acceleration; Rescission and Annulment.  If an Event of
Default with respect to the Securities of any series at the time Outstanding
occurs and is continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount of all of the outstanding Securities of that series,
by written notice to the Company (and, if given by the Holders, to the Trustee),
may declare the principal (or, if the Securities of that series are Original
Issue Discount Securities or Indexed Securities, such portion of the principal
amount as may be specified in the terms of that series) of all the Securities of
that series to be due and payable and upon any such declaration such principal
(or, in the case of original Issue Discount Securities or Indexed Securities,
such specified amount) shall be immediately due and payable.

          At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in aggregate principal amount of the
outstanding Securities of that series, by written notice to the Trustee, may
rescind and annul such declaration and its consequences if all existing Defaults
and Events of Default with respect to Securities of that series, other than the
non-payment of the principal of Securities of that series which have become due
solely by such declaration of acceleration, have been cured

                                      -54-

<PAGE>
 
or waived as provided in Section 5.7.  No such rescission shall affect any
subsequent default or impair any right consequent thereon.

          Section 5.3.  Collection of Indebtedness and Suits for Enforcement by
Trustee.  The Company covenants that if

          (1) default is made in the payment of any interest on any Security or
     coupon, if any, when such interest becomes due and payable and such default
     continues for a period of 30 days, or

          (2) default is made in the payment of the principal of (or premium, if
     any, on) any Security at the Maturity thereof and such default continues
     for a period of 10 days,

the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities or coupons, if any, the whole amount then due and
payable on such Securities for principal, premium, if any, and interest and, to
the extent that payment of such interest shall be legally enforceable, interest
on any overdue principal, premium, if any, and on any overdue interest, at the
rate or rates prescribed therefor in such Securities or coupons, if any, and, in
addition thereto, such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.

          If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.

          Section 5.4.  Trustee May File Proofs of Claim.  The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Holders of
Securities allowed in any judicial proceedings relating to the Company, its
creditors or its property.

          Section 5.5.  Trustee May Enforce Claims Without Possession of
Securities.  All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto.

                                      -55-

<PAGE>
 
          Section 5.6.  Delay or Omission Not Waiver.  No delay or omission by
the Trustee or any Holder of any Securities to exercise any right or remedy
accruing upon an Event of Default shall impair any such right or remedy or
constitute a waiver of or acquiescence in any such Event of Default.

          Section 5.7.  Waiver of Past Defaults.  The Holders of a majority in
aggregate principal amount of Outstanding Securities of any series by notice to
the Trustee may waive on behalf of the Holders of all Securities of such series
a past Default or Event of Default with respect to that series and its
consequences except (i) a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on any Security of such series or any
coupon appertaining thereto or (ii) in respect of a covenant or provision hereof
which pursuant to Section 8.2 cannot be amended or modified without the consent
of the Holder of each outstanding Security of such series adversely affected.
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture.

          Section 5.8.  Control by Majority.  The Holders of a majority in
aggregate principal amount of the Outstanding Securities of each series affected
(with each such series voting as a class) shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on it with respect to
Securities of that series; provided, however, that (i) the Trustee may refuse to
follow any direction that conflicts with law or this Indenture, (ii) the Trustee
may refuse to follow any direction that is unduly prejudicial to the rights of
the Holders of Securities of such series not consenting, or that would in the
good faith judgment of the Trustee have a substantial likelihood of involving
the Trustee in personal liability and (iii) the Trustee may take any other
action deemed proper by the Trustee which is not inconsistent with such
direction.

          Section 5.9.  Limitation on Suits by Holders.  No Holder of any
Security of any series or any related coupons shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless:

          (1) the Holder has previously given written notice to the Trustee of a
     continuing Event of Default with respect to the Securities of that series;

                                      -56-

<PAGE>
 
          (2) the Holders of at least 25% in aggregate principal amount of the
     Outstanding Securities of that series have made a written request to the
     Trustee to institute proceedings in respect of such Event of Default in its
     own name as Trustee hereunder;

          (3) such Holder or Holders have offered to the Trustee indemnity
     satisfactory to the Trustee against any loss, liability or expense to be,
     or which may be, incurred by the Trustee in pursuing the remedy;

          (4) the Trustee for 60 days after its receipt of such notice, request
     and the offer of indemnity has failed to institute any such proceedings;
     and

          (5) during such 60-day period, the Holders of a majority in aggregate
     principal amount of the Outstanding Securities of that series have not
     given to the Trustee a direction inconsistent with such written request.

          No one or more Holders shall have any right in any manner whatever by
virtue of, or by availing of, any provision of this Indenture to affect, disturb
or prejudice the rights of any other of such Holders, or to obtain or to seek to
obtain priority or preference over any other of such Holders or to enforce any
right under this Indenture, except in the manner herein provided and for the
equal and ratable benefit of all of such Holders.

          Section 5.10.  Rights of Holders to Receive Payment.  Notwithstanding
any other provision of this Indenture, but subject to Section 9.2, the right of
any Holder of a Security or coupon to receive payment of principal of, premium,
if any, and, subject to Sections 3.5 and 3.7, interest on the Security, on or
after the respective due dates expressed in the Security (or, in case of
redemption, on the redemption dates) and the right of any Holder of a coupon to
receive payment of interest due as provided in such coupon, or, subject to
Section 5.9, to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.

          Section 5.11.  Application of Money Collected.  Subject to Article 12,
if the Trustee collects any money pursuant to this Article, it shall pay out the
money in the following order, at the date or dates fixed by the Trustee and, in
case of the distribution of such money on account of principal, premium, if any,
or interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:

                                      -57-

<PAGE>
 
          First:  to the Trustee for amounts due under Section 6.9;

          Second:  to Holders of Securities and coupons in respect of which or
     for the benefit of which such money has been collected for amounts due and
     unpaid on such Securities for principal of, premium, if any, and interest,
     ratably, without preference or priority of any kind, according to the
     amounts due and payable on such Securities for principal, premium, if any,
     and interest, respectively; and

          Third:  to the Person or Persons entitled thereto.

          Section 5.12.  Restoration of Rights and Remedies.  If the Trustee or
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then
and in every such case, subject to any determination in such proceeding, the
Company, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.

          Section 5.13.  Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities in the last paragraph of Section 3.6, no right or
remedy herein conferred upon or reserved to the Trustee or the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise.  The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.


                                   ARTICLE 6

                                  The Trustee
                                  -----------

          Section 6.1.  Certain Duties and Responsibilities.

          (a) Except during the continuance of an Event of Default,

          (1) the Trustee undertakes to perform such duties and only such duties
     as are specifically set forth in this

                                      -58-

<PAGE>
 
     Indenture, and no implied covenants or obligations shall be read into this
     Indenture against the Trustee; and

          (2) in the absence of bad faith on its part, the Trustee may
     conclusively rely, as to the truth of the statements and the correctness of
     the opinions expressed therein, upon certificates or opinions furnished to
     the Trustee and conforming to the requirements of this Indenture; but in
     the case of any such certificates or opinions which by any provision hereof
     are specifically required to be furnished to the Trustee, the Trustee shall
     be under a duty to examine the same to determine whether or not they
     conform to the requirements of this Indenture.

          (b) In case an Event of Default has occurred and is continuing with
respect to the Securities of any series, the Trustee shall exercise such of the
rights and powers vested in it by this Indenture with respect to the Securities
of such series, and use the same degree of care and skill in their exercise, as
a prudent person would exercise or use under the circumstances in the conduct of
his own affairs.

          (c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:

          (1) this subsection shall not be construed to limit the effect of
     subsection (a) of this Section;

          (2) the Trustee shall not be liable for any error of judgment made in
     good faith by a Responsible Officer, unless it shall be proved that the
     Trustee was negligent in ascertaining the pertinent facts; and

          (3) the Trustee shall not be liable with respect to any action taken
     or omitted to be taken by it in good faith in accordance with the direction
     of the Holders of a majority in principal amount of the Outstanding
     Securities of any series relating to the time, method and place of
     conducting any proceeding for any remedy available to the Trustee, or
     exercising any trust or power conferred upon the Trustee, under this
     Indenture with respect to the Securities of such series.

          (d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of

                                      -59-

<PAGE>
 
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.

          (e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.

          Section 6.2.  Rights of Trustee.  Subject to the provisions of the
Trust Indenture Act:

          (a) The Trustee may rely and shall be protected in acting or
     refraining from acting upon any resolution, certificate, statement,
     instrument, opinion, report, notice, request, direction, consent, order,
     bond, debenture, note or other paper or document believed by it to be
     genuine and to have been signed or presented by the proper party or
     parties.

          (b) Any request or direction of the Company mentioned herein shall be
     sufficiently evidenced by a Company Request or Company Order (other than
     delivery of any Security and any coupons appertaining thereto, to the
     Trustee for authentication and delivery pursuant to Section 3.3, which
     shall be sufficiently evidenced as provided therein), and any resolution of
     the Board of Directors may be sufficiently evidenced by a Board Resolution.

          (c) Whenever in the administration of this Indenture the Trustee shall
     deem it desirable that a matter be proved or established prior to taking,
     suffering or omitting any action hereunder, the Trustee (unless other
     evidence be herein specifically prescribed) may, in the absence of bad
     faith on its part, rely upon an Officers' Certificate.

          (d) The Trustee may consult with counsel of its selection and the
     written advice of such counsel or any Opinion of Counsel shall be full and
     complete authorization and protection in respect of any action taken,
     suffered or omitted by it hereunder in good faith and in reliance thereon.

          (e) The Trustee shall be under no obligation to exercise any of the
     rights or powers vested in it by this Indenture at the request or direction
     of any of the Holders pursuant to this Indenture, unless such Holders shall
     have offered to the Trustee reasonable security or indemnity against the
     costs, expenses and liabilities which might be incurred by it in compliance
     with such request or direction.

                                      -60-

<PAGE>
 
          (f) The Trustee shall not be bound to make any investigation into the
     facts or matters stated in any resolution, certificate, statement,
     instrument, opinion, report, notice, request, direction, consent, order,
     bond, debenture, note or other paper or document, but the Trustee, in its
     discretion, may make such further inquiry or investigation into such facts
     or matters as it may see fit, and, if the Trustee shall determine to make
     such further inquiry or investigation, it shall be entitled to examine the
     books, records and premises of the Company, personally or by agent or
     attorney.

          (g) The Trustee may act through agents or attorneys and shall not be
     responsible for the misconduct or negligence of any agent or attorney
     appointed with due care.

          (h) The Trustee shall not be liable for any action it takes or omits
     to take in good faith which it believes to be authorized or within its
     rights or powers.

          (i) The Trustee shall not be required to expend or risk its own funds
     or otherwise incur any financial liability in the performance of any of its
     duties hereunder, or in the exercise of its rights or powers, if it shall
     have reasonable grounds for believing that repayment of such funds or
     adequate indemnity against such risk or liability is not reasonably assured
     to it.

          Section 6.3.  Trustee May Hold Securities.  The Trustee, any Paying
Agent, any Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and coupons and,
subject to Sections 310(b) and 311 of the Trust Indenture Act, may otherwise
deal with the Company, an Affiliate or Subsidiary with the same rights it would
have if it were not Trustee, Paying Agent, Registrar or such other agent.

          Section 6.4.  Money Held in Trust.  Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law.  The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed with the Company.

          Section 6.5.  Trustee's Disclaimer.  The recitals contained herein and
in the Securities, except the Trustee's certificate of authentication, shall be
taken as the statements of the Company, and the Trustee assumes no
responsibility for their correctness.  The Trustee makes no representation as to
the validity or adequacy of this Indenture, the Securities or any coupon.  The
Trustee shall not be accountable for the Company's

                                      -61-

<PAGE>
 
use of the proceeds from the Securities or for monies paid over to the Company
pursuant to the Indenture.

          Section 6.6.  Notice of Defaults.  If a Default occurs and is
continuing with respect to the Securities of any series and if it is known to
the Trustee, the Trustee shall, within 90 days after it occurs, transmit, in the
manner and to the extent provided in Section 313(c) of the Trust Indenture Act,
notice of all uncured Defaults known to it; provided, however, that, in the case
of a Default in payment on the Securities of any series, the Trustee may
withhold the notice if and so long as the board of directors, the executive
committee or a committee of its Responsible Officers in good faith determines
that withholding such notice is in the interests of Holders of Securities of
that series; provided further that, in the case of any default or breach of the
character specified in Section 5.1(3) with respect to the Securities and coupons
of such series, no such notice to Holders shall be given until at least 60 days
after the occurrence thereof.

          Section 6.7.  Reports by Trustee to Holders.  Within 60 days after
each May 15 of each year commencing with the first May 15 after the first
issuance of Securities pursuant to this Indenture, the Trustee shall transmit by
mail to all Holders of Securities as provided in Section 313(c) of the Trust
Indenture Act a brief report dated as of such May 15 if required by Section
313(a) of the Trust Indenture Act.  The Trustee also shall comply with Section
313(b) and (d) of the Trust Indenture Act.

          Section 6.8.  Securityholder Lists.  The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Holders of Securities of each series.  If the
Trustee is not the Registrar, the Company shall furnish to the Trustee
semiannually on or before the last day of June and December in each year, and at
such other times as the Trustee may request in writing, a list, in such form and
as of such date as the Trustee may reasonably require, containing all the
information in the possession of the Registrar, the Company or any of its Paying
Agents other than the Trustee as to the names and addresses of Holders of
Securities of each such series.  If there are Bearer Securities of any series
outstanding, even if the Trustee is the Registrar, the Company shall furnish to
the Trustee such a list containing such information with respect to Holders of
such Bearer Securities only.

          Section 6.9.  Compensation and Indemnity.  (a) The Company shall pay
to the Trustee from time to time such compensation as shall be agreed between
the Company and the Trustee for all services rendered by it hereunder.  The
Trustee's compensation shall not be limited by any law on compensation of a

                                      -62-

<PAGE>
 
trustee of an express trust.  The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred by it in connection
with the performance of its duties under this Indenture, except any such expense
as may be attributable to its negligence or bad faith.

          (b) The Company shall indemnify the Trustee for, and hold it harmless
against, any loss, liability or expense incurred by it without negligence or bad
faith on its part arising out of or in connection with its acceptance or
administration of the trust or trusts hereunder.  The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity.  The Company
shall defend the claim and the Trustee shall cooperate in the defense.  The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel.  The Company need not pay for any settlement made
without its consent.

          (c) The Company need not reimburse any expense or indemnify against
any loss or liability incurred by the Trustee through negligence or bad faith.

          (d) To secure the payment obligations of the Company pursuant to this
Section, the Trustee shall have a lien prior to the Securities of any series on
all money or property held or collected by the Trustee, except that held in
trust to pay principal, premium, if any, and interest on particular Securities.

          (e) When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 5.1(4) or Section 5.1(5), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or state bankruptcy, insolvency or
other similar law.

          (f) The provisions of this Section shall survive the termination of
this Indenture.

          Section 6.10.  Replacement of Trustee.  (a)  The resignation or
removal of the Trustee and the appointment of a successor Trustee shall become
effective only upon the successor Trustee's acceptance of appointment as
provided in Section 6.11.

          (b) The Trustee may resign at any time with respect to the Securities
of any series by giving written notice thereof to the Company.  If the
instrument of acceptance by a successor Trustee required by Section 6.11 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of

                                      -63-

<PAGE>
 
competent jurisdiction for the appointment of a successor Trustee with respect
to the Securities of such series.

          (c) The Holders of a majority in aggregate principal amount of the
Outstanding Securities of any series may remove the Trustee with respect to that
series by so notifying the Trustee and the Company and may appoint a successor
Trustee for such series with the Company's consent.

          (d)  If at any time:

          (1) the Trustee fails to comply with Section 310(b) of the Trust
     Indenture Act after written request therefor by the Company or by any
     Holder who has been a bona fide Holder of a Security for at least six
     months, or

          (2) the Trustee shall cease to be eligible under Section 310(a) of the
     Trust Indenture Act and shall fail to resign after written request therefor
     by the Company or by any Holder of a Security who has been a bona fide
     Holder of a Security for at least six months; or

          (3) the Trustee becomes incapable of acting, is adjudged a bankrupt or
     an insolvent or a receiver or public officer takes charge of the Trustee or
     its property or affairs for the purpose of rehabilitation, conservation or
     liquidation, then, in any such case, (i) the Company by or pursuant to a
     Board Resolution may remove the Trustee with respect to all Securities, or
     (ii) subject to Section 315(e) of the Trust Indenture Act, any Holder who
     has been a bona fide Holder of a Security for at least six months may, on
     behalf of himself and all other persons similarly situated, petition any
     court of competent jurisdiction for the removal of the Trustee with respect
     to all Securities and the appointment of a successor Trustee or Trustees.

          (e) If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, with respect to Securities of one or more
series, the Company, by or pursuant to Board Resolution, shall promptly appoint
a successor Trustee with respect to the Securities of that or those series (it
being understood that any such successor Trustee may be appointed with respect
to the Securities of one or more or all of such series and that at any time
there shall be only one Trustee with respect to the Securities of any particular
series) and shall comply with the applicable requirements of Section 6.11.  If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee with respect to the Securities
of any series shall be appointed by Act of the Holders of a majority in
principal amount of the Outstanding Securities of such series delivered to the

                                      -64-

<PAGE>
 
Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment in accordance with the
applicable requirements of Section 6.11, become the successor Trustee with
respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company.  If no successor Trustee with
respect to the Securities of any series shall have been so appointed by the
Company or the Holders and accepted appointment in the manner required by
Section 6.11, any Holder who has been a bona fide Holder of a Security of such
series for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.

          Section 6.11.  Acceptance of Appointment by Successor.  (a)  In case
of the appointment hereunder of a successor Trustee with respect to all
Securities, every such successor Trustee shall execute, acknowledge and deliver
to the Company and to the retiring Trustee an instrument accepting such
appointment.  Thereupon, the resignation or removal of the retiring Trustee
shall become effective, and the successor Trustee, without further act, deed or
conveyance, shall become vested with all the rights, powers and duties of the
retiring Trustee; but, on the request of the Company or the successor Trustee,
such retiring Trustee shall, upon payment of its charges, execute and deliver an
instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such retiring Trustee
hereunder.

          (b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and such successor Trustee shall execute and deliver an
indenture supplemental hereto wherein such successor Trustee shall accept such
appointment and which (i) shall contain such provisions as shall be necessary or
desirable to transfer and confirm to, and to vest in, such successor Trustee all
the rights, powers, trusts and duties of the retiring Trustee with respect to
the Securities of that or those series to which the appointment of such
successor Trustee relates, (ii) if the retiring Trustee is not retiring with
respect to all Securities, shall contain such provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
as to which the retiring Trustee is not retiring shall continue to be vested in
the retiring Trustee, and (iii) shall add to or change any of the provisions of
this Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, it being
understood

                                      -65-

<PAGE>
 
that nothing herein or in such supplemental indenture shall constitute such
Trustees co-trustees of the same trust and that each such Trustee shall be
trustee of a trust or trusts hereunder separate and apart from any trust or
trusts hereunder administered by any other such Trustee and upon the execution
and delivery of such supplemental indenture the resignation or removal of the
retiring Trustee shall become effective to the extent provided therein and each
such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities of that or those series to which the
appointment of such successor Trustee relates; but, on request of the Company or
any successor Trustee, such retiring Trustee shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder with respect to the Securities of that or those series to
which the appointment of such successor Trustee relates.

          (c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in paragraph (a) or (b) of this Section, as the case may be.

          (d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under the Trust Indenture Act.

          (e) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series in the
manner provided for notices to the Holders of Securities in Section 1.6.  Each
notice shall include the name of the successor Trustee with respect to the
securities of such series and the address of its Corporate Trust office.

          Section 6.12.  Eligibility; Disqualification.  There shall at all
times be a Trustee hereunder which shall be eligible to act as Trustee under
Section 310(a)(1) of the Trust Indenture Act and shall have a combined capital
and surplus of at least $75,000,000.  If such corporation publishes reports of
condition at least annually, pursuant to law or the requirements of Federal,
State, Territorial or District of Columbia supervising or examining authority,
then for the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published.  If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article.

                                      -66-

<PAGE>
 
          Section 6.13.  Merger, Conversion, Consolidation or Succession to
Business.  Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto.  In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.

          Section 6.14.  Appointment of Authenticating Agent. The Trustee may
appoint an Authenticating Agent or Agents with respect to one or more series of
Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities of such series issued upon original issue exchange,
registration of transfer or partial redemption thereof, and Securities so
authenticated shall be entitled to the benefits of this Indenture and shall be
valid and obligatory for all purposes as if authenticated by the Trustee
hereunder.  Any such appointment shall be evidenced by an instrument in writing
signed by a Responsible Officer of the Trustee, a copy of which instrument shall
be promptly furnished to the Company.  Wherever reference is made in this
Indenture to the authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent.  Each Authenticating Agent shall be
acceptable to the Company and, except as may otherwise be provided pursuant to
Section 3.1, shall at all times be a bank or trust company or corporation
organized and doing business and in good standing under the laws of the United
States of America or of any State or the District of Columbia, authorized under
such laws to act as Authenticating Agent, having a combined capital and surplus
of not less than $1,500,000 and subject to supervision or examination by Federal
or State authorities.  If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Authenticating Agent shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time an Authenticating Agent
shall cease to be eligible in accordance

                                      -67-

<PAGE>
 
with the provisions of this Section, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section.

          Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or further act
on the part of the Trustee or the Authenticating Agent.

          An Authenticating Agent for any series of Securities may at any time
resign by giving written notice of resignation to the Trustee for such series
and to the Company.  The Trustee for any series of Securities may at any time
terminate the agency of an Authenticating Agent by giving written notice of
termination to such Authenticating Agent and to the Company.  Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
such Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee for such series may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
notice of such appointment to all Holders of Securities of the series with
respect to which such Authenticating Agent will serve in the manner set forth in
Section 1.6.  Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and duties
of its predecessor hereunder, with like effect as if originally named as an
Authenticating Agent herein.  No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.

          The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation including reimbursement of its reasonable expenses
for its services under this Section.

          If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of such series may have endorsed thereon, in
addition to or in lieu of the Trustee's certificate of authentication, an
alternate certificate of authentication substantially in the following form:

     This is one of the Securities of a series issued under the within-mentioned
Indenture.

                                      -68-

<PAGE>
 
                                    The Bank of New York,
                                      as Trustee

                                    By________________________
                                      as Authenticating Agent


                                    By________________________
                                         Authorized Signatory

Sections 6.2, 6.3, 6.5 and 6.9 shall be applicable to any Authenticating Agent.

          Section 6.15.  Trustee's Application for Instructions from the
Company.  Any application by the Trustee for written instructions from the
Company may, at the option of the Trustee, set forth in writing any action
proposed to be taken or omitted by the Trustee under this Indenture and the date
on and/or after which such action shall be taken or such omission shall be
effective.  The Trustee shall not be liable for any action taken by, or omission
of, the Trustee in accordance with a proposal included in such application on or
after the date specified in such application (which date shall not be less than
fifteen Business Days after the date any officer of the Company actually
receives such application, unless any such officer shall have consented in
writing to any earlier date) unless prior to taking any such action (or the
effective date in the case of an omission), the Trustee shall have received
written instructions in response to such application specifying the action to be
taken or omitted.


                                   ARTICLE 7

                  Consolidation, Merger or Sale by the Company
                  --------------------------------------------

          The Company may merge or consolidate with or into any other
corporation or sell, convey, transfer or otherwise dispose of all or
substantially all of its assets to any person, firm or corporation, if (i)(A) in
the case of a merger or consolidation, the Company is the surviving corporation
or (B) in the case of a merger or consolidation where the Company is not the
surviving corporation and in the case of any such sale, conveyance or other
disposition, the successor or acquiring corporation is a corporation organized
and existing under the laws of the United States or a State thereof and such
corporation expressly assumes by supplemental indenture all the obligations of
the Company under the Securities and any coupons appertaining thereto and under
this Indenture, (ii) immediately thereafter, giving effect to such merger or
consolidation, or such sale, conveyance, transfer or other disposition, no
Default or Event of Default

                                      -69-

<PAGE>
 
shall have occurred and be continuing, and (iii) the Company has delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel each stating that
such merger or consolidation, or such sale, conveyance, transfer or other
disposition complies with this Article and that all conditions precedent herein
provided for relating to such transaction have been complied with.  In the event
of the assumption by a successor corporation of the obligations of the Company
as provided in clause (i)(B) of the immediately preceding sentence, such
successor corporation shall succeed to and be substituted for the Company
hereunder and under the Securities and any coupons appertaining thereto and all
such obligations of the Company shall terminate.

                                   ARTICLE 8

                            Supplemental Indentures
                            -----------------------

          Section 8.1.  Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
indentures supplemental hereto, in form reasonably satisfactory to the Trustee,
for any of the following purposes:

          (1) to evidence the succession of another corporation to the Company
     and the assumption by any such successor of the covenants of the Company
     herein and in the Securities; or

          (2) to add to the covenants of the Company for the benefit of the
     Holders of all or any series of Securities (and if such covenants are to be
     for the benefit of less than all series of Securities, stating that such
     covenants are expressly being included solely for the benefit of such
     series) or to surrender any right or power herein conferred upon the
     Company; or

          (3) to add any additional Events of Default with respect to all or any
     series of Securities; or

          (4) to add to or change any of the provisions of this Indenture to
     such extent as shall be necessary to facilitate the issuance of Bearer
     Securities (including, without limitation, to provide that Bearer
     Securities may be registrable as to principal only) or to facilitate the
     issuance of Securities in global form; or

          (5) to add to, change or eliminate any of the provisions of this
     Indenture, provided that any such addition, change or elimination shall
     become effective only when there is no Security Outstanding of any series
     created

                                      -70-

<PAGE>
 
     prior to the execution of such supplemental indenture which is entitled to
     the benefit of such provision; or

          (6)  to secure the Securities; or

          (7) to establish the form or terms of Securities of any series as
     permitted by Sections 2.1 and 3.1; or

          (8) to evidence and provide for the acceptance of appointment
     hereunder by a successor Trustee with respect to the Securities of one or
     more series and to add to or change any of the provisions of this Indenture
     as shall be necessary to provide for or facilitate the administration of
     the trusts hereunder by more than one Trustee, pursuant to the requirements
     of Section 6.10; or

          (9) if allowed without penalty under applicable laws and regulations,
     to permit payment in the United States (including any of the states and the
     District of Columbia), its territories, its possessions and other areas
     subject to its jurisdiction of principal, premium, if any, or interest, if
     any, on Bearer Securities or coupons, if any;

          (10) to correct or supplement any provision herein or in any
     supplemental indenture which may be defective or inconsistent with any
     other provision herein or in any supplemental indenture, to cure any
     ambiguity or correct any mistake or to make any other provisions with
     respect to matters or questions arising under this Indenture, provided such
     action shall not adversely affect the interests of the Holders of
     Securities of any series; or

          (11) to comply with any requirement of the Commission in connection
     with the qualification of this Indenture under the Trust Indenture Act.

          Section 8.2.  Supplemental Indentures With Consent of Holders.  With
the written consent of the Holders of a majority of the aggregate principal
amount of the Outstanding Securities of each series adversely affected by such
supplemental indenture, the Company and the Trustee may enter into an indenture
or indentures supplemental hereto to add any provisions to or to change or
eliminate any provisions of this Indenture or of any other indenture
supplemental hereto or to modify the rights of the Holders of Securities of each
such series; provided, however, that without the consent of the Holder of each
Outstanding Security affected thereby, an amendment under this Section may not:

                                      -71-

<PAGE>
 
          (1) change the Stated Maturity of the principal of, or any installment
     of principal of or interest on, any Security, or reduce the principal
     amount thereof or the rate of interest thereon or any premium payable upon
     the redemption thereof, or reduce the amount of the principal of an
     Original Issue Discount Security that would be due and payable upon a
     declaration of acceleration of the Maturity thereof pursuant to Section
     5.2, or change the coin or currency in which, any Securities or any premium
     or the interest thereon is payable, or impair the right to institute suit
     for the enforcement of any such payment on or after the Stated Maturity
     thereof (or, in the case of redemption, on or after the Redemption Date),
     or modify the provisions of this indenture with respect to the
     subordination of the Securities, or adversely affect the right to convert
     any Security as may be provided pursuant to Section 3.1 herein;

          (2) reduce the percentage in principal amount of the Outstanding
     Securities of any series, the consent of whose Holders is required for any
     such supplemental indenture, or the consent of whose Holders is required
     for any waiver (of compliance with certain provisions of this Indenture or
     certain defaults hereunder and their consequences) provided for in this
     Indenture;

          (3) change any obligation of the Company to maintain an office or
     agency in the places and for the purposes specified in Section 9.2;

          (4) adversely affect the right to convert the Securities of any series
     as provided in Article 12 hereof; or

          (5) make any change in Section 5.7 or this 8.2(a) except to increase
     any percentage or to provide that certain other provisions of this
     Indenture cannot be modified or waived with the consent of the Holders of
     each Outstanding Security affected thereby.

          For the purposes of this Section 8.2, if the Securities of any series
are issuable upon the exercise of warrants, any holder of an unexercised and
unexpired warrant with respect to such series shall not be deemed to be a Holder
of Outstanding Securities of such series in the amount issuable upon the
exercise of such warrants.

          A supplemental indenture that changes or eliminates any covenant or
other provision of this Indenture, which has expressly been included solely for
the benefit of one or more particular series of Securities, or that modifies the
rights of

                                      -72-

<PAGE>
 
the Holders of Securities of such series with respect to such covenant or other
provision, shall be deemed not to affect the rights under this Indenture of the
Holders of Securities of any other series.

          It is not necessary under this Section 8.2 for the Holders to consent
to the particular form of any proposed supplemental indenture, but it is
sufficient if they consent to the substance thereof.

          Section 8.3.  Compliance with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article shall comply with the requirements
of the Trust Indenture Act as then in effect.

          Section 8.4.  Execution of Supplemental Indentures.  In executing, or
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or the modification thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture.  The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.

          Section 8.5.  Effect of Supplemental Indentures.  Upon the execution
of any supplemental indenture under this article, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a
part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder and of any
coupon appertaining thereto shall be bound thereby.

          Section 8.6.  Reference in Securities to Supplemental Indentures.
Securities, including any coupons, of any series authenticated and delivered
after the execution of any supplemental indenture pursuant to this Article may,
and shall if required by the Trustee, bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture.  If the
Company shall so determine, new Securities including any coupons of any series
so modified as to conform, in the opinion of the Trustee and the Company, to any
such supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities including any coupons of such series.

                                      -73-

<PAGE>
 
                                   ARTICLE 9

                                   Covenants
                                   ---------

          Section 9.1.  Payment of Principal, Premium, If Any, and Interest.
The Company covenants and agrees for the benefit of the Holders of each series
of Securities that it will duly and punctually pay the principal of, premium, if
any, and interest on the Securities of that series in accordance with the terms
of the Securities of such series, any coupons appertaining thereto and this
Indenture.  An installment of principal or interest shall be considered paid on
the date it is due if the Trustee or Paying Agent holds on that date money
designated for and sufficient to pay the installment.

          Section 9.2.  Maintenance of Office or Agency.  If Securities of a
series are issued as Registered Securities, the Company will maintain in each
Place of Payment for any series of Securities an office or agency where
Securities of that series may be presented or surrendered for payment, where
Securities of that series may be surrendered for registration of transfer or
exchange, where Securities may be surrendered for conversion and where notices
and demands to or upon the Company in respect of the Securities of that series
and this Indenture may be served.  If Securities of a series are issuable as
Bearer Securities, the Company will maintain, (i) subject to any laws or
regulations applicable thereto, an office or agency in a Place of Payment for
that series which is located outside the United States, where Securities of that
series and related coupons may be presented and surrendered for payment;
provided, however, that if the Securities of that series are listed on The
International Stock Exchange of the United Kingdom and the Republic of Ireland
Limited, the Luxembourg Stock Exchange or any other stock exchange located
outside the United States and such stock exchange shall so require, the Company
will maintain a Paying Agent for the Securities of that series in London,
Luxembourg or any other required city located outside the United States, as the
case may be, so long as the Securities of that series are listed on such
exchange, and (ii) subject to any laws or regulations applicable thereto, in a
Place of Payment for that series located outside the United States, where
Securities of that series may be surrendered for exchange and where notices and
demands to or upon the Company in respect of the Securities of that series and
this Indenture may be served.  The Company will give prompt written notice to
the Trustee of the location, and any change in the location, of any such office
or agency.  If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the

                                      -74-

<PAGE>
 
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.

          Unless otherwise specified as contemplated by Section 3.1, no payment
of principal, premium or interest on Bearer Securities shall be made at any
office or agency of the Company in the United States, by check mailed to any
address in the United States, by transfer to an account located in the United
States or upon presentation or surrender in the United States of a Bearer
Security or coupon for payment, even if the payment would be credited to an
account located outside the United States; provided, however, that, if the
Securities of a series are denominated and payable in Dollars, payment of
principal of and any premium or interest on any such Bearer Security shall be
made at the office of the Company's Paying Agent in the Borough of Manhattan,
The City of New York, if (but only if) payment in Dollars of the full amount of
such principal, premium or interest, as the case may be, at all offices or
agencies outside the United States maintained for the purpose by the Company in
accordance with this Indenture is illegal or effectively precluded by exchange
controls or other similar restrictions.

          The Company may also from time to time designate one or more other
offices or agencies where the Securities (including any coupons, if any) of one
or more series may be presented or surrendered for any or all such purposes and
may from time to time rescind such designations; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in each Place of Payment for
Securities (including any coupons, if any) of any series for such purposes.  The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.

          Unless otherwise specified as contemplated by Section 3.1, the 
Trustee shall initially serve as Paying Agent.

          Section 9.3.  Money for Securities to Be Held in Trust; Unclaimed
Money.  If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of, premium, if any, or interest on any of the Securities of that
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal, premium, if any, or interest so
becoming due until such sums shall be paid to such persons or otherwise disposed
of as herein provided and will promptly notify the Trustee in writing of its
action or failure so to act.

          The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to

                                      -75-

<PAGE>
 
the Trustee an instrument in which such Paying Agent shall agree with the
Trustee, subject to the provisions of this Section, that such Paying Agent will:

          (1) hold all sums held by it for the payment of the principal of,
     premium, if any, or interest on Securities of that series in trust for the
     benefit of the Persons entitled thereto until such sums shall be paid to
     such Persons or otherwise disposed of as herein provided;

          (2) give the Trustee notice of any default by the Company (or any
     other obligor upon the Securities of that series) in the making of any
     payment of principal, premium, if any, or interest on the Securities; and

          (3) at any time during the continuance of any such default, upon the
     written request of the Trustee, forthwith pay to the Trustee all sums so
     held in trust by such Paying Agent.

          The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.

          Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of any principal, premium or interest
on any Security of any series and remaining unclaimed for two years after such
principal, premium, if any, or interest has become due and payable shall be paid
to the Company on Company Request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Security and coupon, if any,
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in The City of New York, or cause to be mailed to such Holder,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any

                                      -76-

<PAGE>
 
unclaimed balance of such money then remaining will be repaid to the Company.

          Section 9.4.  Corporate Existence.  Subject to Article 7, the Company
will at all times do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence; provided that nothing in
this Section 9.4 shall prevent the abandonment or termination of any right or
franchise of the Company, if, in the opinion of the Company, such abandonment or
termination is in the best interests of the Company and does not materially
adversely affect the ability of the Company to operate its business or to
fulfill its obligations hereunder.

          Section 9.5.  Insurance.  The Company covenants and agrees that it
will maintain, and cause each of its Subsidiaries to maintain, insurance with
responsible and reputable insurance companies or associations or through a
program of self-insurance in such amounts and covering such risks as are
consistent with sound business practice for corporations engaged in the same or
a similar business similarly situated.

          Section 9.6.  Reports by the Company.  The Company covenants:

          (a)  to file with the Trustee, within 30 days after the Company is
     required to file the same with the Commission, copies of the annual reports
     and of the information, documents and other reports (or copies of such
     portions of any of the foregoing as the Commission may from time to time by
     rules and regulations prescribe) which it may be required to file with the
     Commission pursuant to section 13 or section 15(d) of the Securities
     Exchange Act of 1934, as amended; or, if it is not required to file
     information, documents or reports pursuant to either of such sections, then
     to file with the Trustee and the Commission, in accordance with rules and
     regulations prescribed from time to time by the Commission, such of the
     supplementary and periodic information, documents and reports which may be
     required pursuant to section 13 of the Securities Exchange Act of 1934, as
     amended, in respect of a security listed and registered on a national
     securities exchange as may be prescribed from time to time in such rules
     and regulations;

          (b) to file with the Trustee and the Commission, in accordance with
     the rules and regulations prescribed from time to time by the Commission,
     such additional information, documents and reports with respect to
     compliance by it with the conditions and covenants provided for in this
     Indenture, as may be required from time to time by such rules and
     regulations; and

                                      -77-

<PAGE>
 
          (c) to transmit to all Holders of Securities, within 30 days after the
     filing thereof with the Trustee, in the manner and to the extent provided
     in section 313(c) of the Trust Indenture Act, such summaries of any
     information, documents and reports required to be filed by it pursuant to
     subsections (a) and (b) of this Section 9.6, as may be required by rules
     and regulations prescribed from time to time by the Commission.

          Section 9.7.  Annual Review Certificate.  The Company covenants and
agrees to deliver to the Trustee, within 120 days after the end of each fiscal
year of the Company, a brief certificate from the principal executive officer,
principal financial officer, or principal accounting officer as to his or her
knowledge of the Company's compliance with all conditions and covenants under
this Indenture.  For purposes of this Section 9.7, such compliance shall be
determined without regard to any period of grace or requirement of notice
provided under this Indenture.

          Section 9.8.  Limitation on Dividends and Capital Stock Acquisitions.
The Company covenants and agrees that, if at any time it has failed to make any
payment of interest, principal or premium on the Debentures when due (after
giving effect to any grace period for payment thereof as provided in Section
5.1),  the Company will not, until all defaulted interest on the Debentures and
all principal and premium, if any, then due and payable on the Debentures shall
have been paid in full, (i) declare set aside or pay any dividend or
distribution on any capital stock of the Company (except for dividends or
distributions in shares of its capital stock or rights to acquire shares of its
capital stock), or (ii) repurchase, redeem or otherwise acquire, or make any
sinking fund payment for the purchase or redemption of, any shares of its
capital stock (except by conversion into or exchange for shares of its capital
stock and except for a redemption, purchase or other acquisition of shares of
its capital stock made for the purpose of an employee incentive plan or benefit
plan of the Company or any of its subsidiaries); provided, however, that any
moneys theretofore deposited in any sinking fund with respect to any preferred
stock of the Company in compliance with this Section 9.8 and the provisions of
such sinking fund may thereafter be applied to the purchase or redemption of
such preferred stock in accordance with the terms of such sinking fund without
regard to the restrictions in this Section 9.8.

                                      -78-

<PAGE>
 
                                  ARTICLE 10

                                  Redemption
                                  ----------

          Section 10.1.  Applicability of Article.  Securities (including
coupons, if any) of any series which are redeemable before their Stated Maturity
shall be redeemable in accordance with their terms and (except as otherwise
specified as contemplated by Section 3.1 for Securities of any series) in
accordance with this Article.

          Section 10.2.  Election to Redeem; Notice to Trustee.  The election of
the Company to redeem any Securities, including coupons, if any, shall be
evidenced by or pursuant to a Board Resolution or an Officers' Certificate.  In
the case of any redemption at the election of the Company of less than all the
Securities or coupons, if any, of any series, the Company shall, at least 60
days prior to the Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such Redemption
Date, of the principal amount of Securities of such series to be redeemed and,
if applicable, of the tenor of the Securities to be redeemed.  In the case of
any redemption of Securities (i) prior to the expiration of any restriction on
such redemption provided in the terms of such Securities or elsewhere in this
Indenture or (ii) pursuant to an election of the Company which is subject to a
condition specified in the terms of such Securities, the Company shall furnish
the Trustee with an Officers' Certificate evidencing compliance with such
restriction or condition.

          Section 10.3.  Selection of Securities to Be Redeemed.  Unless
otherwise specified as contemplated by Section 3.1, if less than all the
Securities (including coupons, if any) of a series with the same original issue
date, interest rate and Stated Maturity are to be redeemed, the Trustee, not
more than 45 days prior to the redemption date, shall select the Securities of
the series to be redeemed in such manner as the Trustee shall deem fair and
appropriate.  The Trustee shall make the selection from Securities of the series
that are Outstanding and that have not previously been called for redemption and
may provide for the selection for redemption of portions (equal to the minimum
authorized denomination for Securities, including coupons, if any, of that
series or any integral multiple thereof) of the principal amount of Securities,
including coupons, if any, of such series of a denomination larger than the
minimum authorized denomination for Securities of that series.  The Trustee
shall promptly notify the Company in writing of the Securities selected by the
Trustee for redemption and, in the case of any Securities selected for partial
redemption, the principal amount thereof to be redeemed.

                                      -79-

<PAGE>
 
          For purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities (including coupons, if
any) shall relate, in the case of any Securities (including coupons, if any)
redeemed or to be redeemed only in part, to the portion of the principal amount
of such Securities (including coupons, if any) which has been or is to be
redeemed.

          Section 10.4.  Notice of Redemption.  Unless otherwise specified as
contemplated by Section 3.1, notice of redemption shall be given in the manner
provided in Section 1.6 not less than 30 days nor more than 60 days prior to the
Redemption Date to the Holders of the Securities to be redeemed.

          All notices of redemption shall state:

          (1)  the Redemption Date;

          (2)  the Redemption Price;

          (3) if fewer than all the Outstanding Securities of a series are to be
     redeemed, the identification (and, in the case of partial redemption, the
     principal amounts) of the particular Security or Securities to be redeemed;

          (4) in case any Security is to be redeemed in part only, the notice
     which relates to such Security shall state that on and after the Redemption
     Date, upon surrender of such Security, the holder will receive, without a
     charge; a new Security or Securities of authorized denominations for the
     principal amount thereof remaining unredeemed;

          (5)  the Place or Places of Payment where such Securities, together in
     the case of Bearer Securities with all coupons appertaining thereto, if
     any, maturing after the Redemption Date, are to be surrendered for payment
     for the Redemption Price;

          (6) that Securities of the series called for redemption and all
     unmatured coupons, if any, appertaining thereto must be surrendered to the
     Paying Agent to collect the redemption price;

          (7) that, on the Redemption Date, the Redemption Price will become due
     and payable upon each such Security, or the portion thereof, to be redeemed
     and, if applicable, that interest thereon will cease to accrue on and after
     said date;

          (8) that the redemption is for a sinking fund, if such is the case;

                                      -80-

<PAGE>
 
          (9) that, unless otherwise specified in such notice, Bearer Securities
     of any series, if any, surrendered for redemption must be accompanied by
     all coupons maturing subsequent to the Redemption Date or the amount of any
     such missing coupon or coupons will be deducted from the Redemption Price,
     unless security or indemnity satisfactory to the Company, the Trustee and
     any Paying Agent is furnished; and

          (10) CUSIP number.

          Notice of redemption of Securities to be redeemed shall be given by
the Company or, at the Company s request, by the Trustee in the name and at the
expense of the Company.

          Section 10.5.  Deposit of Redemption Price.  On or prior to 12:00 noon
New York City time on any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 9.3) an amount of
money in the currency or currencies (including currency units or composite
currencies) in which the Securities of such series are payable (except as
otherwise specified pursuant to Section 3.1 for the Securities of such series)
sufficient to pay on the Redemption Date the Redemption Price of, and (unless
the Redemption Date shall be an Interest Payment Date) interest accrued to the
Redemption Date on, all Securities or portions thereof which are to be redeemed
on that date.

          Unless any Security by its terms prohibits any sinking fund payment
obligation from being satisfied by delivering and crediting Securities
(including Securities redeemed otherwise than through a sinking fund), the
Company may deliver such Securities to the Trustee for crediting against such
payment obligation in accordance with the terms of such Securities and this
Indenture.

          Section 10.6.  Securities Payable on Redemption Date.  Notice of
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest and the coupons for any such interest
appertaining to any Bearer Security so to be redeemed, except to the extent
provided below, shall be void.  Except as provided in the next succeeding
paragraph, upon surrender of any such Security, including coupons, if any, for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price, together with accrued interest to the
Redemption Date; provided, however, that

                                      -81-

<PAGE>
 
installments of interest on Bearer Securities whose Stated Maturity is prior to
the Redemption Date shall be payable only at an office or agency located outside
the United States and its possessions (except as otherwise provided in Section
9.2) and, unless otherwise specified as contemplated by Section 3.1, only upon
presentation and surrender of coupons for such interest; and provided further
that, unless otherwise specified as contemplated by Section 3.1, installments of
interest on Registered Securities whose Stated Maturity is prior to the
Redemption Date shall be payable to the Holders of such Securities, or one or
more Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
3.7.

          If any Bearer Security surrendered for redemption shall not be
accompanied by all appurtenant coupons maturing after the Redemption Date, such
Bearer Security may be paid after deducting from the Redemption Price an amount
equal to the face amount of all such missing coupons, or the surrender of such
missing coupon or coupons may be waived by the Company and the Trustee if there
be furnished to them such security or indemnity as they may require to save each
of them and any Paying Agent harmless.  If thereafter the Holder of such Bearer
Security shall surrender to the Trustee or any Paying Agent any such missing
coupon in respect of which a deduction shall have been made from the Redemption
Price, such Holder shall be entitled to receive the amount so deducted;
provided, however, that interest represented by coupons shall be payable only at
an office or agency located outside of the United States (except as otherwise
provided pursuant to Section 9.2) and, unless otherwise specified as
contemplated by Section 3.1, only upon presentation and surrender of those
coupons.

          If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate prescribed
therefor in the Security.

          Section 10.7.  Securities Redeemed in Part.  Upon surrender of a
Security that is redeemed in part at any Place of Payment therefor (with, if the
Company or the Trustee so require, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in writing), the Company
shall execute and the Trustee shall authenticate and deliver to the Holder of
that Security, without service charge, a new Security or Securities of the same
series, the same form and the same Maturity in any authorized denomination equal
in aggregate principal amount to the unredeemed portion of the principal of the
Security surrendered.

                                      -82-

<PAGE>
 
                                  ARTICLE 11

                                 Sinking Funds
                                 -------------

          Section 11.1.  Applicability of Article.  The provisions of this
Article shall be applicable to any sinking fund for the retirement of Securities
of a series except as otherwise specified as contemplated by Section 3.1 for
Securities of such series.

          The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "mandatory sinking
fund payment," and any payment in excess of such minimum amount provided for by
the terms of Securities of any series is herein referred to as an "optional
sinking fund payment."  If provided for by the terms of Securities of any
series, the cash amount of any sinking fund payment may be subject to reduction
as provided in Section 11.2.  Each sinking fund payment shall be applied to the
redemption of Securities of any series as provided for by the terms of
Securities of such series.

          Section 11.2.  Satisfaction of Sinking Fund Payments with Securities.
The Company (i) may deliver Outstanding Securities of a series (other than any
previously called for redemption) together, in the case of Bearer Securities of
such series, with all unmatured coupons appertaining thereto and (ii) may apply
as a credit Securities of a series which have been redeemed either at the
election of the Company pursuant to the terms of such Securities or through the
application of permitted optional sinking fund payments pursuant to the terms of
such Securities, in each case in satisfaction of all or any part of any sinking
fund payment with respect to the Securities of such series required to be made
pursuant to the terms of such Securities as provided for by the terms of such
series; provided that such Securities have not been previously so credited.
Such Securities shall be received and credited for such purpose by the Trustee
at the Redemption Price specified in such Securities for redemption through
operation of the sinking fund and the amount of such sinking fund payment shall
be reduced accordingly.

          Section 11.3.  Redemption of Securities for Sinking Fund.  Not less
than 60 days prior to each sinking fund payment date for any series of
Securities, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing sinking fund payment for that series
pursuant to the terms of that series, the portion thereof, if any, which is to
be satisfied by payment of cash and the portion thereof, if any, which is to be
satisfied by delivering and crediting Securities of that series pursuant to
Section 11.2 and will also deliver to the Trustee any Securities to be so
delivered.  Not less than 30

                                      -83-

<PAGE>
 
days before each such sinking fund payment date, the Trustee shall select the
Securities to be redeemed upon such sinking fund payment date in the manner
specified in Section 10.3 and cause notice of the redemption thereof to be given
in the name of and at the expense of the Company in the manner provided in
Section 10.4.  Such notice having been duly given, the redemption of such
Securities shall be made upon the terms and in the manner stated in Sections
10.6 and 10.7.


                                   ARTICLE 12

                          Subordination of Securities
                          ---------------------------

          SECTION 12.1.  Securities Subordinated to Senior Indebtedness.  (a)
The Company agrees, and each Holder of the Securities by acceptance thereof
likewise agrees, that the payment of the principal of, premium, if any, and
interest on the Securities is subordinated, to the extent and in the manner
provided in this Article 12, to the prior payment in full of all Senior
Indebtedness of the Company.

          (b) All provisions of this Article 12 shall be subject to Section
12.14.

          SECTION 12.2.  Company Not to Make Payments with Respect to Securities
in Certain Circumstances; Limitations on Acceleration of Securities.  (a)  Upon
the maturity of any Senior Indebtedness of the Company by lapse of time,
acceleration or otherwise, all obligations with respect thereto shall first be
paid in full, or such payment duly provided for in cash or in a manner
satisfactory to the holders of such Senior Indebtedness, before any payment is
made on account of the principal of, premium, if any, or interest on the
Securities or to redeem, retire, purchase, deposit moneys for the defeasance of
or acquire any of the Securities.

          (b) Upon the happening of (i) any default in payment of any Senior
Indebtedness of the Company or (ii) any other default on Senior Indebtedness of
the Company and the maturity of such Senior Indebtedness is accelerated in
accordance with its terms, then, unless (w) such default relates to Senior
Indebtedness of the Company in an aggregate amount equal to or less than $20
million, (x) such default shall have been cured or waived or shall have ceased
to exist, (y) any such acceleration has been rescinded, or (z) such Senior
Indebtedness has been paid in full, no direct or indirect payment in cash,
property or securities, by set-off or otherwise (except payment of the
Securities from funds previously deposited in accordance with Section 4.1 at any
time such deposit was not prohibited by this Indenture), shall be made or agreed
to be made by the Company on

                                      -84-

<PAGE>
 
account of the principal of or premium, if any, or interest on the Securities,
or in respect of any redemption, retirement, purchase, deposit of moneys for the
defeasance or other acquisition of any of the Securities in the case of such a
default in Senior Indebtedness of the Company, the Company shall not deposit
money for any such payment or distribution with the Trustee or any Paying Agent
nor shall the Company (if the Company is acting as its own Paying Agent)
segregate and hold in trust money for any such payment or distribution.

          (c) Upon the happening of an event of default (other than under
circumstances when the terms of paragraph (b) of this Section 12.2 are
applicable) with respect to any Senior Indebtedness of the Company pursuant to
which the holders thereof are entitled under the terms of such Senior
Indebtedness to immediately accelerate the maturity thereof (without further
notice or expiration of any applicable grace periods), upon written notice
thereof given to each of the Company and the Trustee by the trustee for or other
representative of the holders of at least $25 million of Senior Indebtedness of
the Company (a "Payment Notice"), then, unless and until such event of default
shall have been cured or waived or shall have ceased to exist, no direct or
indirect payment in cash, property or securities, by set-off or otherwise
(except payment of the Securities from funds previously deposited in accordance
with Section 4.1 at any time such deposit was not prohibited by this Indenture),
shall be made or agreed to be made by the Company on account of the principal of
or premium, if any, or interest on the Securities, or in respect of any
redemption, retirement, purchase, deposit of moneys for the defeasance or other
acquisition of any of the Securities, and the Company shall not deposit money
for any such payment or distribution with the Trustee or any Paying Agent nor
shall the Company or a Subsidiary (if the Company or such Subsidiary is acting
as Paying Agent) segregate and hold in trust money for any such payment or
distribution (a "Payment Block"); provided, however, that this Section 12.2(c)
shall not prevent the making of any payment for more than 120 days after a
Payment Notice shall have been given unless the Senior Indebtedness in respect
of which such event of default exists has been declared due and payable in its
entirety, in which case no such payment shall be made until such acceleration
has been rescinded or annulled or such Senior Indebtedness has been paid in full
in accordance with its terms.  Notwithstanding the foregoing, (i) not more than
one Payment Notice shall be given with respect to a particular event of default
(which shall not bar subsequent Payment Notices for other such events of
default), (ii) all events of default under Senior Indebtedness occurring within
any 30-day period shall be treated as one event of default to the extent that
one or more Payment Notices are issued in connection therewith and (iii) no more
than two Payment Blocks shall be permitted within any period of 12 consecutive
months.  Any

                                      -85-

<PAGE>
 
payment made in contravention of the provisions of this Section 12.2(c) shall be
returned to the Company.

          (d) In the event that, notwithstanding the provisions of Section
12.2(a) or 12.2(b), the Trustee or the Holder of any Security shall have
received any payment on account of the principal of or premium, if any, or
interest on the Securities in contravention of Section 12.2(a) or 12.2(b) or
after the happening of a default in payment of any Senior Indebtedness of the
Company, or any acceleration of the maturity of any Senior Indebtedness of the
Company, then, in either such case, except in the case of any such default which
shall have been cured or waived or shall have ceased to exist, such payment
(subject to the provisions of Sections 12.6 and 12.7) shall be held for the
benefit of, and shall be paid over and delivered to, the holders of such Senior
Indebtedness of the Company (pro rata as to each of such holders on the basis of
the respective amounts of Senior Indebtedness of the Company held by them) or
their representative or the trustee under the indenture or other agreement (if
any) pursuant to which Senior Indebtedness of the Company may have been issued,
as their respective interests may appear, for application to the payment of all
Senior Indebtedness of the Company remaining unpaid to the extent necessary to
pay all Senior Indebtedness of the Company in full in accordance with its terms,
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Indebtedness of the Company.

          (e)(1)  Upon the occurrence of an Event of Default under Section
5.1(1) through (3) and (6), the Trustee or holders of 25% of the outstanding
principal amount of the Securities of any series must give notice of such Event
of Default and the intention to accelerate to the Company and any holders of
Senior Indebtedness which have theretofore requested of the Trustee such notice,
and no acceleration of the Securities of any series shall be effective unless
and until such Event of Default is continuing on the sixtieth day after the date
of delivery of such notice.  The Company may pay the holders of the Securities
of any series any defaulted payment and all other amounts due following any such
acceleration of the maturity of the Securities if this Section 12.2(a) would not
prohibit such payment to be made at that time.

          (2) Nothing in this Article 12 shall prevent or delay the Trustee or
the holders of the Securities from taking any action in connection with the
acceleration of the maturity of the Securities pursuant to Section 5.2 upon the
occurrence of an Event of Default under either of Section 5.1(4) or 5.1(5).

          (3) Except as provided in Section 12.2(e)(1), a failure to make any
payment with respect to the Securities as a

                                      -86-

<PAGE>
 
result of the rights of holders of Senior Indebtedness of the Company described
in Section 12.2(b) or 12.2(c) will not have any effect on the right of holders
of the Securities to accelerate the maturities thereof as a result of such
payment default.  The Company shall give prompt written notice to the Trustee of
any default in the payment of principal of or interest on any Senior
Indebtedness of the Company, and in the event of any such default, shall provide
to the Trustee, in the form of an Officers' Certificate, the names, addresses
and respective amounts due holders of such Senior Indebtedness or the name and
address of the trustee acting on their behalf, if any. The Trustee shall be
entitled to rely conclusively on such Officers' Certificate without independent
verification.

          SECTION 12.3.  Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization of the Company.  Upon
the distribution of assets of the Company in any Dissolution, winding up,
liquidation (total or partial) or similar proceeding relating to the Company
(whether in bankruptcy, insolvency or receivership proceedings or upon an
assignment for the benefit of creditors or otherwise):

          (1) the holders of all Senior Indebtedness of the Company shall first
     be entitled to receive payment in full of all Senior Indebtedness (or to
     have such payment duly provided for in a manner satisfactory to them) in
     cash or in a manner satisfactory to the holders of Senior Indebtedness of
     the Company before the Holders of the Securities, in the case of Senior
     Indebtedness of the Company, are entitled to receive any payment on account
     of the principal of, premium, if any, or interest on the Securities;

          (2) any payment or distribution of assets of the Company of any kind
     or character, whether in cash, property or securities (other than
     securities of the Company as reorganized or readjusted or securities of the
     Company or any other company, trust or corporation provided for by a plan
     of reorganization or readjustment, the payment of which is junior or
     otherwise subordinate, at least to the extent provided in this Article 12
     with respect to the Securities to the payment of all Senior Indebtedness of
     the Company at the time outstanding and to the payment of all securities
     issued in exchange therefor to the holders of the Senior Indebtedness of
     the Company at the time outstanding), to which the Holders of the
     Securities or the Trustee on behalf of the Holders of the Securities would
     be entitled except for the provisions of this Article 12, shall be paid by
     the liquidating trustee or agent or other person making such payment or
     distribution directly to the holders of the Senior Indebtedness of the
     Company or their representatives or to the trustee under any indenture
     under which such

                                      -87-

<PAGE>
 
     Senior Indebtedness may have been issued (pro rata) as to each such holder,
     representative or trustee on the basis of respective amounts of unpaid
     Senior Indebtedness held or represented by each), to the extent necessary
     to make payment in full of all Senior Indebtedness of the Company remaining
     unpaid, after giving effect to any concurrent payment or distribution or
     provision therefor to the holders of such Senior Indebtedness; and

          (3) in the event that notwithstanding the foregoing provisions of this
     Section 12.3, any payment or distribution of assets of the Company of any
     kind or character, whether in cash, property or securities (other than
     securities of the Company as reorganized or readjusted or securities of the
     Company or any other company, trust or corporation provided for by a plan
     of reorganization or readjustment, the payment of which is junior or
     otherwise subordinate, at least to the extent provided in this Article 12
     with respect to the Securities, to the payment of all Senior Indebtedness
     of the Company at the time outstanding and to the payment of all securities
     issued in exchange therefor to the holders of the Senior Indebtedness of
     the Company at the time outstanding), shall be received by the Trustee or
     the Holders of the Securities on account of principal of, premium, if any,
     or interest on the Securities before all Senior Indebtedness of the Company
     is paid in full in cash or in a manner satisfactory to the holders of such
     Senior Indebtedness in accordance with its terms, or effective provision
     made for its payment, such payment or distribution (subject to the
     provisions of Sections 12.6 and 12.7) shall be received and held for the
     benefit of and paid over to the holders of the Senior Indebtedness of the
     Company remaining unpaid or unprovided for or their representative, or to
     the trustee under any indenture under which such Senior Indebtedness of the
     Company may have been issued (pro rata as provided in paragraph (2) above),
     for application to the payment of such Senior Indebtedness of the Company
     to the extent necessary to pay all such Senior Indebtedness of the Company
     in full in cash or in a manner satisfactory to the holders of Senior
     Indebtedness of the Company, in accordance with its terms, after giving
     effect to any concurrent payment or distribution or provision therefor to
     the holders of such Senior Indebtedness of the Company.

          The Company shall give prompt written notice to the Trustee of any
dissolution, winding up, liquidation or reorganization of the Company or any
assignment for the benefit of the Company's creditors tending toward the
liquidation of the business and assets of the Company.

                                      -88-

<PAGE>
 
          SECTION 12.4.  Holders to Be Subrogated to Rights of Holders of Senior
Indebtedness.  Upon the payment in full of all Senior Indebtedness of the
Company in cash or in a manner satisfactory to the holders of such Senior
Indebtedness, the Holders of the Securities shall be subrogated equally and
ratably to the rights of the holders of Senior Indebtedness of the Company to
receive payments or distributions of assets of the Company applicable to the
Senior Indebtedness of the Company until all amounts owing on the Securities
shall be paid in full, and for the purpose of such subrogation no payments or
distributions to the holders of Senior Indebtedness of the Company by or on
behalf of the Company or by or on behalf of Holders of the Securities by virtue
of this Article 12 which otherwise would have been made to the Holders of the
Securities shall, as between the Company and the Holders of the Securities, be
deemed to be payment by the Company to or on account of Senior Indebtedness of
the Company, it being understood that the provisions of this Article 12 are
intended solely for the purpose of defining the relative rights of the Holders
of the Securities, on the one hand, and the holders of Senior Indebtedness of
the Company, on the other hand.

          SECTION 12.5.  Obligation of the Company Unconditional.  Nothing
contained in this Article 12 or elsewhere in this Indenture or in any Security
is intended to or shall impair, as between the Company and the Holders of the
Securities the obligations of the Company which are absolute and unconditional,
to pay to the Holders of the Securities the principal of (premium, if any) and
interest on the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders of the Securities and creditors of the Company other than
the holders of Senior Indebtedness of the Company, nor, except as expressly
provided in this Article 12, shall anything herein or in the Securities prevent
the Trustee or the Holder of any Security from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article 12 of the holders of Senior Indebtedness of
the Company in respect of cash, property or securities of the Company upon the
exercise of any such remedy.  Upon any distribution of assets of the Company
referred to in this Article 12, the Trustee, subject to the provisions of
Section 6.1, and the Holders of the Securities shall be entitled to rely upon
any order or decree by any court of competent jurisdiction in which such
dissolution, winding up, liquidation or reorganization proceedings are pending,
or a certificate of the liquidating trustee or agent or other person making any
distribution to the Trustee or the Holders of the securities, for the purpose of
ascertaining the persons entitled to participate in such distribution, the
holders of Senior Indebtedness of the Company and other indebtedness of the
Company, the amount thereof

                                      -89-

<PAGE>
 
or payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article 12.

          Nothing contained in this Article 12 or elsewhere in this Indenture or
in any Security is intended to or shall affect the obligations of the Company to
make, or prevent the Company from making, at any time except during the pendency
of any dissolution, winding up, liquidation (total or partial) or similar
proceeding, and except during the continuance of any event specified in Section
12.2 (not cured or waived), payments at any time of the principal of (or
premium, if any) or interest on the Securities.

          SECTION 12.6.  Knowledge of Trustee.  Notwithstanding any provision of
this Indenture, the Trustee shall not at any time be charged with knowledge of
the existence of any facts which would prohibit the making of any payment of
monies to or by the Trustee until three Business Days after a Responsible
Officer of the Trustee on behalf of the Trustee shall have received at the
Corporate Trust Office of the Trustee written notice thereof from the Company,
any Holder, or the holder or representative of any class of Senior Indebtedness
of the Company identifying the specific sections of this Indenture involved and
describing in detail the facts that would obligate the Trustee to withhold
payments to Holders of Securities, and prior to such time, the Trustee, subject
to the provisions of Section 6.1, shall be entitled in all respects conclusively
to assume that no such facts exist.  The Trustee shall be entitled to rely on
the delivery to it of a written notice by an individual representing himself to
be a holder of Senior Indebtedness of the Company (or a trustee on behalf of
such holder) to establish that such notice has been given by a holder of any
such Senior Indebtedness or a trustee on behalf of any such holder.

          In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any person as a holder of
Senior Indebtedness of the Company to participate in any payment or distribution
pursuant to this Article, the Trustee may request such person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness of the Company held by such person, the extent to which such
person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such person under this Article, and if such
evidence is not furnished, the Trustee may defer any payment to such person
pending judicial determination as to the right of such person to receive such
payment.

          SECTION 12.7.  Application by Trustee of Moneys Deposited with It.  If
two Business Days prior to the date on

                                      -90-

<PAGE>
 
which by the terms of this Indenture any moneys deposited with the Trustee or
any Paying Agent (other than the Company or a Subsidiary) may become payable for
any purpose (including, without limitation, the payment of the principal of,
premium, if any, or interest on any Security) the Trustee shall not have
received with respect to such moneys the notice provided for in Section 12.6,
then the Trustee shall have full power and authority to receive such monies and
to apply the same to the purpose for which they were received and shall not be
affected by any notice to the contrary which may be received by it on or after
such date.  This Section 12.7 shall be construed solely for the benefit of the
Trustee and Paying Agent and shall not otherwise affect the rights of holders of
such Senior Indebtedness.

          SECTION 12.8.  Subordination Rights Not Impaired by Acts or Omissions
of Company or Holders of Senior Indebtedness.  No right of any present or future
holders of any Senior Indebtedness of the Company to enforce subordination as
provided herein shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to act
by any such holder, or by any noncompliance by the Company with the terms of
this Indenture, regardless of any knowledge thereof which any such holder may
have or be otherwise charged with.

          SECTION 12.9.  Holders Authorize Trustee to Effectuate Subordination
of Securities.  Each Holder of the Securities by his acceptance thereof
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate in the discretion of the Trustee to
effectuate the subordination provided in this Article 12 and appoints the
Trustee his attorney in-fact for such purpose, including, without limitation, in
the event of any dissolution, winding up, liquidation or reorganization of the
Company (whether in bankruptcy, insolvency or receivership proceedings or upon
an assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of the Company, the timely filing of a
claim for the unpaid balance of its or his Securities in the form required in
said proceedings.  If the Trustee does not file a proper claim or proof of debt
in the form required in such proceedings before the expiration of the time to
file such claim or claims, then the holders of Senior Indebtedness of the
Company are hereby authorized to have the right to file and are hereby
authorized to file an appropriate claim for and on behalf of the Holders of said
Securities.

          SECTION 12.10.  Right of Trustee to Hold Senior Indebtedness.  The
Trustee shall be entitled to all of the rights set forth in this Article 12 in
respect of any Senior Indebtedness of the Company at any time held by it to the
same

                                      -91-

<PAGE>
 
extent as any other holder of such Senior Indebtedness of the Company, and
nothing in this Indenture shall be construed to deprive the Trustee of any of
its rights as such holder.  With respect to the holders of Senior Indebtedness
of the Company, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article 12, and
no implied covenants or obligations with respect to the holders of Senior
Indebtedness of the Company shall be read into this Indenture against the
Trustee.  The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness of the Company, and the Trustee shall not be
liable to any holder of Senior Indebtedness of the Company if it shall
mistakenly pay over or deliver to Holders of Securities, the Company or any
other Person moneys or assets to which any holder of such Senior Indebtedness
shall be entitled by virtue of this Article 12 or otherwise.

          SECTION 12.11.  Article 12 Not to Prevent Events of Default.  The
failure to make a payment on account of principal or interest by reason of any
provision in this Article 12 shall not be construed as preventing the occurrence
of an Event of Default under Section 5.1.

          SECTION 12.12.  Paying Agents Other Than the Trustee.  In case at any
time any Paying Agent (including, without limitation, the Company or any
Subsidiary) other than the Trustee shall have been appointed by the Company and
be then acting hereunder, the term "Trustee" as used in this Article 12 shall in
such case (unless the context shall otherwise require) be construed as extending
to and including such Paying Agent (except the Company and its subsidiaries in
the case of Sections 12.6 and 12.7) within its meaning as fully for all intents
and purposes as if such Paying Agent were named in this Article 12 in addition
to or in place of the Trustee.

          SECTION 12.13.  Trustee's Compensation Not Prejudiced.  Nothing in
this Article 12 shall apply to amounts due to the Trustee pursuant to Section
6.9.

          SECTION 12.14.  Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money held in trust
under Article 4 by the Trustee for the payment of principal of, premiums if any,
and interest on the Securities shall not be subordinated to the prior payment of
any Senior Indebtedness of the Company or subject to the restrictions set forth
in this Article 12 and none of the Holders

                                      -92-

<PAGE>
 
shall be obligated to pay over any such amount to the Company or any holder of
Senior Indebtedness of the Company or any other creditor of the Company.

                            _______________________

                                      -93-

<PAGE>
 
          This Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one instrument.

          IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.

                                    UAL CORPORATION


                                    By:______________________
                                       Title:



[Seal]

Attest:


___________________________
Title:


                                       THE BANK OF NEW YORK,
                                       TRUSTEE



                                       By:______________________
                                          Title:



[Seal]

Attest:


______________________________
Title:

                                      -94-



<PAGE>
 
                                                                     EXHIBIT 4.2

                                UAL CORPORATION
                             Officer's Certificate
                             ---------------------

          Pursuant to Sections 2.1 and 3.1 of the Indenture, dated as of April
3, 1995 (the "Indenture"), between UAL Corporation, a Delaware corporation (the
"Company"), and The Bank of New York, a New York banking corporation, as trustee
(the "Trustee"), the undersigned officer of the Company hereby certifies on
behalf of the Company as follows:

          1.  Authorization.  The establishment of a series of Securities of the
Company has been approved and authorized in accordance with the provisions of
the Indenture pursuant to resolutions adopted by the Board of Directors of the
Company on December 15, 1994 and January 26, 1995.

          2.  Compliance with Covenants and Conditions Precedent.  All covenants
and conditions precedent provided for in the Indenture relating to the
establishment of series of Securities have been complied with.

          3.  Terms.  The terms of the series of Securities established 
pursuant to this Officer's Certificate will be as follows:

          (i)      Title.  The title of the Securities is "6 3/8% Convertible
                   Subordinated Debentures due 2025" (the "Debentures").

          (ii)     Aggregate Principal Amount.  The aggregate principal amount
                   of the Debentures which may be authenticated and delivered
                   under the
 Indenture (except for Debentures authenticated and
                   delivered upon registration of transfer of, or in exchange
                   for, or in lieu of, other Debentures pursuant to Sections
                   3.4, 3.5, 3.6, 8.6 or 10.7 of the Indenture and except for
                   any Debentures that, pursuant to the last paragraph of
                   Section 3.3 of the Indenture, are deemed never to have been
                   authenticated and delivered under the Indenture) will not
                   exceed $600,000,000.

<PAGE>
 
          (iii)    Stated Maturity.  The date on which the principal of the
                   Debentures is payable is February 1, 2025.

          (iv)     Rate of Interest; Interest Payment Dates; Regular Record
                   Dates.  The Debentures will bear interest at the rate of 
                   6 3/8% per annum, except that holders of record of the
                   Debentures will be entitled to interest at a rate of 6 1/4% 
                   per annum from February 1, 1995 through April __, 1995 in 
                   lieu of dividends accumulating after January 31, 1995 on
                   the Series A Preferred Stock.  The date from which such
                   interest will accrue is April __, 1995.  The Interest Payment
                   Dates on which such interest will be payable are February 1,
                   May 1, August 1 and November 1 of each year, commencing May
                   1, 1995, subject to extension as provided in the form of
                   Debenture attached hereto as Exhibit A.  The Regular Record
                   Date for the interest payable on any Interest Payment Date
                   will be the January 15, April 15, July 15 or October 15 prior
                   to such Interest Payment Date.

          (v)      Place of Payment.  The principal of and interest on the
                   Debentures will be payable at the office or agency of the
                   Company maintained for that purpose in the City of New York
                   (which, unless changed, will be a corporate trust office or
                   agency of the Trustee); provided, that at the option of the
                   Company, payments may be made by checks mailed by the Trustee
                   to the Holders of the Debentures at their registered
                   addresses or by wire transfers to accounts maintained by the
                   Holders as specified in the Register, provided that the
                   payment of principal with respect to any Debenture will be
                   made only upon surrender of such Debenture to the Trustee.

          (vi)     Optional Redemption.  The Debentures will be redeemable at
                   the option of the Company after meeting certain conditions
                   set forth in the form of Debenture attached hereto as Exhibit
                   A, in whole or in part, on or after May 1, 1996 at the
                   following percentages of the principal amount thereof
                   redeemed, plus accrued and unpaid interest, if any, up to but
                   excluding the Redemption Date, if redeemed during the twelve-
                   month period commencing May 1 of the

                                      -2-

<PAGE>
 
                   years indicated:

                   Year                            Redemption Price
                   ----                            ----------------

                   1996                            104.375%
                   1997                            103.750%
                   1998                            103.125%
                   1999                            102.500%
                   2000                            101.875%
                   2001                            101.250%
                   2002                            100.625%
                   2003 and thereafter             100.000%

                   Notice of redemption will be mailed at least 30 days but no
                   more than 60 days before the Redemption Date to each Holder
                   at its registered address.  If fewer than all the outstanding
                   Debentures are to be redeemed, the provisions of Section 10.3
                   of the Indenture will govern.

          (vii)    Mandatory Redemption.  The Debentures will contain no 
                   provision for mandatory redemption, a sinking fund or
                   analogous provisions.

          (viii)   Denominations.  The Debentures will be issuable in
                   denominations of $1,000 and integral multiples thereof.

          (ix)     Currency.  The Debentures will be denominated in Dollars and
                   the principal of and interest on the Debentures will be
                   payable in Dollars.  The Debentures will be satisfied and
                   discharged as provided in Article 4 of the Indenture.

          (x)      Payment Currency.  The principal of and interest on the
                   Debentures will not be payable in a currency other than
                   Dollars.

          (xi)     Formula.  The amount of payments of principal of and interest
                   on the Debentures will not be determined with reference to an
                   index, formula or other method.

          (xii)    Amount Payable Upon Acceleration.  The principal amount of 
                   the Debentures payable upon declaration of acceleration will
                   be governed by Section 5.2 of the Indenture.

          (xiii)   Payment of Interest.  The payment of interest on the
                   Debentures will be governed by Sections

                                      -3-

<PAGE>
 
                   2.3 and 3.7 of the Indenture.

          (xiv)    Special Rights.  There are no provisions granting special
                   rights to the Holders upon the occurrence of specified
                   events.

          (xv)     Covenants; Events of Default.  The covenants set forth in
                   Section 9.8 of the Indenture will also apply if the Company
                   exercises its right to extend the interest payment period for
                   an Extension Period (as defined in the Debenture).  These
                   restrictions will apply until any such Extension Period has
                   terminated.

                   An additional Event of Default occurs with respect to the
                   Debentures if (whatever the reason for such Event of Default
                   and whether it shall be occasioned by the provisions of
                   Article 12 of the Indenture or be voluntary or involuntary or
                   be effected by operation of law or pursuant to any judgment,
                   decree or order of any court or any order, rule or regulation
                   of any administrative or governmental body):

                   The Company defaults during an Extension Period under the
                   terms of any agreement or instrument evidencing or under
                   which the Company has outstanding any indebtedness for
                   borrowed money and such indebtedness shall be accelerated so
                   that the same shall be or become due and payable prior to the
                   date on which the same would otherwise become due and payable
                   and the aggregate principal amount thereof so accelerated
                   exceeds $150,000,000 and such acceleration is not rescinded
                   or annulled within ten days after there has been given, by
                   registered or certified mail, to the Company by the Trustee
                   or to the Company and the Trustee by the Holders of at least
                   25% in aggregate principal amount of the Outstanding
                   Securities of that series a written notice specifying such
                   default and stating that such notice is a "Notice of Default"
                   under the Indenture; (it being understood however, that,
                   subject to the provisions of Section 6.1 of the Indenture,
                   the Trustee shall not be deemed to have knowledge of such
                   default under such agreement or instrument unless either (A)
                   a Responsible Officer of the Trustee shall have actual
                   knowledge of such default or (B) a Responsible Officer of the
                   Trustee shall have received

                                      -4-

<PAGE>
 
                   written notice thereof from the Company, from any Holder,
                   from the holder of any such indebtedness or from the trustee
                   under any such agreement or other instrument); provided,
                   however, that if such default under such agreement or
                   instrument is remedied or cured by the Company or waived by
                   the holders of such indebtedness, then the Event of Default
                   hereunder by reason thereof shall be deemed likewise to have
                   been thereupon remedied, cured or waived without further
                   action upon the part of either the Trustee or any of such
                   Holders.

          (xvi)    Additional Amounts.  The Company will not pay additional
                   amounts on the Debentures held by a Person that is not a U.S.
                   Person in respect of taxes or similar charges withheld or
                   deducted.

          (xvii)   Registered Securities.  The Debentures will be issuable as
                   Registered Securities, without interest coupons.  Section 3.5
                   of the Indenture will govern the Debentures.

          (xviii)  Bearer Securities; Temporary Global Security.  The Debentures
                   will not be Bearer Securities or represented by a temporary
                   global Security.

          (xix)    Defeasance and Covenant Defeasance.  Sections 4.4 and 4.5 of
                   the Indenture will not apply to the Debentures.

          (xx)     Registrar; Paying Agent.  The Trustee will be the Registrar
                   and the Paying Agent for the Debentures.

          (xxi)    Warrants.  No warrants will be issued in connection with the
                   Debentures.

          (xxii)   Exchange Rate Agent.  There will be no Exchange Rate Agent
                   with respect to the Debentures.

          (xxiii)  Permanent Global Form.  The Debentures will be represented by
                   a permanent global debenture (the "Global Debenture"), with
                   respect to which The Depository Trust Company will be the
                   Depositary.  Section 3.5 of the Indenture will govern the
                   Global Debenture.

          (xxiv)   Conversion.  The Debentures will be convertible at the option
                   of the Holders thereof at any time after the date of original
                   issuance

                                      -5-

<PAGE>
 
                   thereof, unless previously redeemed, into $541.90 for each
                   $1,000 principal amount thereof and the number of fully-paid
                   and nonassessable shares of common stock of the Company
                   obtained by dividing (i) the difference between Principal
                   Amount (as defined in the Debenture) of the Debenture and
                   $541.90 by (ii) the Conversion Price (as defined in the
                   Debenture) and surrendering such Debentures to be converted
                   as provided in the form of Debenture attached hereto as
                   Exhibit A, provided, however, that the right to convert
                   Debentures called for redemption shall terminate at the close
                   of business on the day preceding the Redemption Date, unless
                   the Company shall default in making payment of the cash
                   payable upon such redemption.  The form of Debenture will
                   govern the other terms and conditions with respect to
                   conversion of the Debentures.

          (xxv)    Subordination.  Article 12 of the Indenture will govern the
                   terms and conditions under which the Debentures are
                   subordinate to the Senior Indebtedness of the Company.

          (xxvi)   Other Terms.  The Debentures will have the other terms and
                   will be substantially in the form set forth in the form of
                   Debenture attached hereto as Exhibit A and may have such
                   other terms as are provided in such form.  In case of any
                   conflict between this certificate and the Debentures in the
                   form attached hereto as Exhibit A, or between the Resolutions
                   and the Debentures in such form, the Debentures will control.

     Capitalized terms used herein and not otherwise defined herein have the
meanings specified in the Indenture.

     The undersigned, for himself, states that he has read and is familiar with
the provisions of Article 2 of the Indenture relating to the establishment of
the form of Security representing a series of Securities thereunder and Article
3 of the Indenture relating to the establishment of a series of Securities
thereunder, and in each case, the definitions therein relating thereto; that he
is generally familiar with the other provisions of the Indenture and with the
affairs of the Company and its acts and proceedings and that the statements and
opinions made by him in this Certificate are based upon such familiarity; that,
in his opinion, he has made such examination or investigation as is necessary to
enable him to

                                      -6-

<PAGE>
 
express an informed opinion as to whether or not the covenants and conditions
referred to above have been complied with; and, that in his opinion, the
covenants and conditions referred to above have been complied with.

     Insofar as this Certificate relates to legal matters, it is based, as
provided for in Section 1.3 of the Indenture, upon the opinion of Counsel
delivered to the Trustee contemporaneously herewith pursuant to Section 3.3 of
the Indenture and relating to the Debentures.

     IN WITNESS WHEREOF, the undersigned has hereunto signed this Certificate on
behalf of the Company this ___ day of April 1995.

                                         UAL CORPORATION


                                         By: ______________________
                                         Name: Douglas A. Hacker     
                                         Title: Senior Vice 
                                                President - Finance

                                      -7-



<PAGE>
 
                                                                     EXHIBIT 4.3

                                UAL CORPORATION

                        6 3/8% CONVERTIBLE SUBORDINATED
                               DEBENTURE DUE 2025


$________________                                               No._____________
CUSIP____________


          UAL CORPORATION, a corporation duly organized and existing under the
laws of the State of Delaware (herein called the "Company", which term includes
any successor under the Indenture hereinafter referred to), hereby promises to
pay to ________________ or registered assigns, the principal sum of ___________
Dollars, on February 1, 2025.

       Interest Payment Dates:  February 1, May 1, August 1 and November 1
                 Record Dates:  January 15, April 15, July 15 and October 15

          Reference is hereby made to the further provisions of this Debenture
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if fully set forth at this place.

          Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee by manual signature, this Debenture shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for any
purpose.


          THIS SECURITY IS IN GLOBAL FORM WITHIN THE MEANING OF THE INDENTURE
          HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY
          OR A NOMINEE OF A DEPOSITARY.  UNLESS AND UNTIL IT IS EXCHANGED IN
          WHOLE OR IN PART FOR SECURITIES IN CERTIFICATED FORM, THIS SECURITY

          MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
          NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
          DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY
          OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
          SUCCESSOR DEPOSITARY.

<PAGE>
 
          IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed in its corporate name by the manual or facsimile signature of its
Chairman of the Board or its President and Chief Executive Officer and impressed
or imprinted with its corporate seal or facsimile thereof, attested by the
manual or facsimile signature of its Secretary.

                                               UAL CORPORATION

(Seal)

                                               By________________________
                                                    (Title)

Attest:


___________________________
Secretary


          This is one of the Securities of a series issued under the within-
mentioned Indenture.

Dated:                                         THE BANK OF NEW YORK,
                                                 as Trustee



                                               By:__________________________
                                                     Authorized Signatory

<PAGE>
 
                             (REVERSE OF DEBENTURE)

                                UAL CORPORATION
                        6 3/8% CONVERTIBLE SUBORDINATED
                               DEBENTURE DUE 2025

          (1)  Indenture.  This Debenture is one of a duly authorized issue of
Securities of the Company designated as its 6 3/8% Convertible Subordinated
Debentures due 2025 (herein called the "Debentures"), limited in aggregate
principal amount to $600,000,000, issued and to be issued under an Indenture
dated as of April 3, 1995 (herein called the "Indenture") between the Company
and The Bank of New York, as Trustee (herein called the "Trustee", which term
includes any successor Trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights thereunder of the Company, the Trustee and the Holders of the
Debentures, and the terms upon which the Debentures are, and are to be,
authenticated and delivered.  The terms of the Debentures include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) as in effect on the date
upon which the Debentures are first issued under the Indenture (the "Issue
Date").  The Debentures are unsecured general obligations of the Company.  All
capitalized terms used in this Debenture and not defined herein will have the
meanings assigned to them in the Indenture.

          (2)  Interest.  The Company promises to pay interest on said principal
sum, quarterly in arrears on February 1, May 1, August 1 and November 1, of each
year, commencing May 1, 1995 at the rate of 6 1/4% per annum from February 1,
1995 to but excluding April __, 1995 and from and after April __, 1995 at the
rate of 6 3/8% per annum, from the February 1, May 1, August 1 or November 1, as
the case may be, next preceding the date of this Debenture to which interest on
the Debentures has been paid or duly provided for, unless the date hereof is an
Interest Payment Date to which interest has been paid or duly provided for in
which case from the date of this Debenture, or unless no interest has been paid
or duly provided for on the Debentures, in which case from __________ 1, 1995,
until payment of said principal sum has been made or duly provided for.
Notwithstanding the foregoing, when there is no existing default in the payment
of interest on the Debentures, each Debenture authenticated after the Regular
Record Date for any Interest Payment Date, but prior to such Interest Payment
Date shall be dated the date of its authentication but shall bear interest from
such Interest Payment Date; provided, however, that if and to the extent that
the Company shall default in the payment of the interest due on such Interest
Payment Date, then all such Debentures shall bear interest from the February 1,
May 1, August 1, or November 1, as the case may be, to which interest had been
paid or duly provided for next preceding such Interest Payment Date, unless no
interest has been paid or duly provided for on the Debentures, in which case
from ____________ 1, 1995.  The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in said Indenture,
be paid to the Person in whose name this Debenture

<PAGE>
 
(or one or more Predecessor Debentures) is registered on the Regular Record Date
for such Interest Payment Date.

          (3)  Extension of Interest Payment Period.  Notwithstanding anything
contained in the Indenture to the contrary, the Company shall have the right at
any time during the term of the Debentures, so long as the Company is not in
default in the payment of interest on the Debentures, to extend the interest
payment period for an Extension Period (as defined below).  Except as provided
in the next succeeding sentence, no interest shall be due and payable during an
Extension Period, but at the end of each Extension Period the Company shall pay
all interest then accrued and unpaid on the Debentures, together with interest
thereon, compounded quarterly, at the rate of 6 3/8% per annum, to the extent
permitted by applicable law.  Prior to the termination of any Extension Period,
the Company may (a) on any Interest Payment Date pay all or any portion of the
interest accrued on the Debentures as provided on the face hereof to holders of
record on the Regular Record Date for such Interest Payment Date or (b) from
time to time further extend the interest payment period as provided in the last
sentence of this paragraph, provided that any such Extension Period, together
with all such previous and further extensions thereof, may not exceed 20
calendar quarters from the last date to which interest on the Debentures was
paid in full.  If the Company shall elect to pay all of the interest accrued on
the Debentures on an Interest Payment Date during any Extension Period, such
Extension Period shall automatically terminate on such Interest Payment Date.
Upon the termination of any Extension Period and the payment of all amounts of
interest then due, the Company may select a new Extension Period, subject to the
above requirements.  The Company shall cause the Trustee to give notice to the
Holders in the manner provided in the Indenture, not less than five Business
Days prior to the earlier of (i) the January 15, April 15, July 15 or October 15
next preceding the applicable Interest Payment Date and (ii) the date on which
the Company or the Trustee is required to give notice to the New York Stock
Exchange or other applicable self-regulatory organization of the Regular Record
Date and payment date for such related interest payment period, of

          (x) the Company's election to initiate an Extension Period and the
          duration thereof,

          (y) the Company's election to extend any Extension Period beyond the
          Interest Payment Date on which such Extension Period is then scheduled
          to terminate, and the duration of such extension, and

          (z) the Company's election to make a full or partial payment of
          interest accrued on the Debentures on any Interest Payment Date during
          any Extension Period and the amount of such payment.

          The term "Extension Period" means the period from and including the
Interest Payment Date next following the date of any notice of extension of the
interest payment period on the Debentures given pursuant to the last sentence of
the preceding paragraph (or,

<PAGE>
 
in the case of any further extension of the interest payment period pursuant to
the third sentence of the preceding paragraph before the payment in full of all
accrued interest on the Debentures, the Interest Payment Date next following the
date of the first such notice given after the last Interest Payment Date to
which interest was paid in full) to but excluding the Interest Payment Date to
which payment of interest on the Debentures is so extended, after giving effect
to any further extensions of the interest payment period on the Debentures
pursuant to the third sentence of the preceding paragraph; provided that no
Extension Period shall exceed 20 consecutive quarters from the last date to
which interest on the Debentures was paid in full; and provided, further, that
any Extension Period shall end on an Interest Payment Date.  Notwithstanding the
foregoing, in no event shall any Extension Period exceed the final Stated
Maturity of the principal of the Debentures.

          (4)  Method of Payment.  The principal of (and premium, if any) and
interest on this Debenture are payable in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts at the office or agency of the Company in the City of
New York; provided that, at the option of the Company, interest may be paid (i)
by check mailed by the Trustee to the address of the Holder as it shall appear
on the Register or (ii) by wire transfer to an account maintained by the Holder
as specified in the Register, provided that the payment of principal with
respect to any Debenture will be made only upon surrender of such Debenture to
the Trustee.  Any interest not punctually paid or duly provided for shall be
payable as provided in the Indenture.

          (5)  Paying Agent and Registrar.  Initially, the Trustee will act as
Paying Agent and Registrar through its office at 101 Barclay Street, New York,
New York  10286.  The Company may change any Paying Agent or Registrar without
prior notice to any Holder.

          (6)  Conversion.  Each Debenture will be convertible at the option of
the holder hereof at any time after the date of original issuance hereof, unless
previously redeemed, into $541.90 for each $1,000 principal amount thereof and
the number of fully paid and nonassessable shares of Common Stock obtained by
dividing (i) the difference between Principal Amount of such Debenture and
$541.90 by (ii) the Conversion Price, and surrendering such Debenture to be
converted as provided below; provided, however, that the right to convert
Debentures called for redemption shall terminate at the close of business on the
day preceding the Redemption Date, unless the Company shall default in making
payment of the cash payable upon such redemption.  Certificates will be issued
for the remaining Debentures in any case in which fewer than all of the
Debentures represented by a certificate are converted.

          In order to exercise the conversion right, the holder of the Debenture
to be converted shall surrender it, duly endorsed or assigned to the Company or
in blank, at the office of the Trustee in the City of New York, accompanied by
written notice to the Company that the holder hereof elects to convert the
Debenture.  Unless the shares issuable on conversion are to be issued in the
same name as the name in which such Debenture is

<PAGE>
 
registered, each Debenture surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Company, duly executed by
the Holder or such Holder's duly authorized attorney and an amount sufficient to
pay any transfer or similar tax (or evidence reasonably satisfactory to the
Company demonstrating that such taxes have been paid).

          Holders of Debentures at the close of business on an interest payment
record date shall be entitled to receive the interest payable on such Debentures
on the corresponding Interest Payment Date notwithstanding the conversion hereof
following such interest payment record date and prior to such Interest Payment
Date.  However, Debentures surrendered for conversion during the period between
the close of business on any interest payment record date and the opening of
business on the corresponding Interest Payment Date (except Debentures converted
after the issuance of a notice of redemption with respect to a Redemption Date
during such period, which shall be entitled to such interest on the Interest
Payment Date) must be accompanied by payment of an amount equal to the interest
payable on such Debentures on such Interest Payment Date.  A holder of
Debentures on an interest payment record date who (or whose transferee) tenders
any such Debentures for conversion into shares of Common Stock on such Interest
Payment Date will receive the interest payable by the Company on such Debentures
on such date, and the converting holder need not include payment of the amount
of such interest upon surrender of Debentures for conversion.  Except as
provided above, the Company shall make no payment or allowance for unpaid
interest, whether or not in arrears, on converted Debentures or for dividends on
the shares of Common Stock issued upon such conversion.

          As promptly as practicable after the surrender of Debentures as
aforesaid, the Company shall issue and shall deliver at such office to such
Holder, or on his or her written order, a certificate or certificates for the
number of full shares of Common Stock issuable upon the conversion of such
Debentures, and any fractional interest in respect of a share of Common Stock
arising upon such conversion shall be settled as provided below.

          Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the Debentures shall have
been surrendered and such notice (and, if applicable, payment of an amount equal
to the interest payable on such Debentures) received by the Company as
aforesaid, and the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder or holders of record of the shares
represented thereby at such time on such date and such conversion shall be at
the Conversion Price in effect at such time on such date, unless the stock
transfer books of the Company shall be closed on that date, in which event such
person or persons shall be deemed to have become such holder or holders of
record at the close of business on the next succeeding day on which such stock
transfer books are open, but such conversion shall be at the Conversion Price in
effect on the date upon which such shares shall have been surrendered and such
notice received by the Company.

<PAGE>
 
          No fractional shares or scrip representing fractions of shares of
Common Stock will be issued upon conversion of the Debentures.  Instead of any
fractional interest in a share of Common Stock that would otherwise be
deliverable upon the conversion of a Debenture, the Company shall pay to the
holder of such share an amount in cash based upon the Current Market Price of
Common Stock on the Trading Day immediately preceding the date of conversion.
If more than one Debenture shall be surrendered for conversion at one time by
the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate principal
amount of the Debentures so surrendered.

          The Conversion Price shall be adjusted from time to time as follows:

          (a)  If the Company shall after the Issue Date (A) pay a dividend or
          make a distribution on its capital stock in shares of its Common
          Stock, (B) subdivide its outstanding Common Stock into a greater
          number of shares, (C) combine its outstanding Common Stock into a
          smaller number of shares or (D) issue any shares of capital stock by
          reclassification of its Common Stock, the Conversion Price in effect
          at the opening of business on the day next following the date fixed
          for the determination of stockholders entitled to receive such
          dividend or distribution or at the opening of business on the day next
          following the day on which such subdivision, combination or
          reclassification becomes effective, as the case may be, shall be
          adjusted so that the holder of any Debentures thereafter surrendered
          for conversion shall be entitled to receive the number of shares of
          Common Stock that such holder would have owned or have been entitled
          to receive after the happening of any of the events described above
          had such Debenture been converted immediately prior to the record date
          in the case of a dividend or distribution or the effective date in the
          case of a subdivision, combination or reclassification.  An adjustment
          made pursuant to this paragraph (a) shall become effective immediately
          after the opening of business on the day next following the record
          date (except as provided below) in the case of a dividend or
          distribution and shall become effective immediately after the opening
          of business on the day next following the effective date in the case
          of a subdivision, combination or reclassification.

          (b)  If the Company shall issue after the Issue Date rights or
          warrants (in each case, other than the Rights) to all holders of
          Common Stock entitling them (for a period expiring within 45 days
          after the record date mentioned below) to subscribe for or purchase
          Common Stock at a price per share less than the Fair Market Value per
          share of Common Stock on the record date for the determination of
          stockholders entitled to receive such rights or warrants, then the
          Conversion Price in effect at the opening of business on the day next
          following such record date shall be adjusted to equal the price
          determined by multiplying (1) the Conversion Price in effect
          immediately prior to the opening of business on the day next following
          the date fixed for such determination by

<PAGE>
 
          (2) a fraction, the numerator of which shall be the sum of (A) the
          number of shares of Common Stock outstanding on the close of business
          on the date fixed for such determination and (B) the number of shares
          that the aggregate proceeds to the Company from the exercise of such
          rights or warrants for Common Stock would purchase at such Fair Market
          Value, and the denominator of which shall be the sum of (A) the number
          of shares of Common Stock outstanding on the close of business on the
          date fixed for such determination and (B) the number of additional
          shares of Common Stock offered for subscription or purchase pursuant
          to such rights or warrants.  Such adjustment shall become effective
          immediately after the opening of business on the day next following
          such record date (except as provided below).  In determining whether
          any rights or warrants entitle the holders of Common Stock to
          subscribe for or purchase shares of Common Stock at less than such
          Fair Market Value, there shall be taken into account any consideration
          received by the Company upon issuance and upon exercise of such rights
          or warrants, the value of such consideration, if other than cash, to
          be determined by the Board.

          (c)  If the Company shall distribute to all holders of its Common
          Stock any shares of capital stock of the Company (other than Common
          Stock) or evidence of its indebtedness or assets (excluding cash
          dividends or distributions paid from profits or surplus of the
          Company) or rights or warrants (in each case, other than the Rights)
          to subscribe for or purchase any of its securities (excluding those
          rights and warrants issued to all holders of Common Stock entitling
          them for a period expiring within 45 days after the record date
          referred to in paragraph (b) above to subscribe for or purchase Common
          Stock, which rights and warrants are referred to in and treated under
          paragraph (b) above (any of the foregoing being hereinafter in this
          paragraph (c) called the "Securities")), then in each such case the
          Conversion Price shall be adjusted so that it shall equal the price
          determined by multiplying (1) the Conversion Price in effect
          immediately prior to the close of business on the date fixed for the
          determination of stockholders entitled to receive such distribution by
          (2) a fraction, the numerator of which shall be the Fair Market Value
          per share of the Common Stock on the record date mentioned below less
          the then fair market value (as determined by the Board of Directors,
          whose determination shall be conclusive) of the portion of the capital
          stock or assets or evidences of indebtedness so distributed or of such
          rights or warrants applicable to one share of Common Stock, and the
          denominator of which shall be the Fair Market Value per share of the
          Common Stock on the record date mentioned below.  Such adjustment
          shall become effective immediately at the opening of business on the
          Business Day next following (except as provided below) the record date
          for the determination of stockholders entitled to receive such
          distribution.  For the purposes of this paragraph (c), the
          distribution of a Security, which is distributed not only to the
          holders of the Common Stock on

<PAGE>
 
          the date fixed for the determination of stockholders entitled to
          receive such distribution of such security, but also is distributed
          with each share of Common Stock delivered to a person converting a
          Debenture after such determination date, shall not require an
          adjustment of the Conversion Price pursuant to this paragraph (c);
          provided that on the date, if any, on which a Person converting a
          Debenture would no longer be entitled to receive such Security with a
          share of Common Stock (other than as a result of the termination of
          all such Securities), a distribution of such Securities shall be
          deemed to have occurred and the Conversion Price shall be adjusted as
          provided in this paragraph (c) (and such day shall be deemed to be
          "the date fixed for the determination of the stockholders entitled to
          receive such distribution" and "the record date" within the meaning of
          the two preceding sentences).
 
          (d) No adjustment in the Conversion Price shall be required unless
          such adjustment would require a cumulative increase or decrease of at
          least 1% in such price; provided, however, that any adjustments that
          by reason of this paragraph (d) are not required to be made shall be
          carried forward and taken into account in any subsequent adjustment
          until made; and provided, further, that any adjustment shall be
          required and made in accordance with these conversion provisions
          (other than this paragraph (d)) not later than such time as may be
          required in order to preserve the tax-free nature of a distribution to
          the holders of shares of Common Stock.  Notwithstanding any other
          provisions, the Company shall not be required to make any adjustment
          of the Conversion Price for the issuance of any shares of Common Stock
          pursuant to any plan providing for the reinvestment of dividends on
          securities of the Company.  All calculations shall be made to the
          nearest cent (with $.005 being rounded upward) or to the nearest 1/10
          of a share (with .05 of a share being rounded upward), as the case may
          be.  Anything to the contrary notwithstanding, the Company shall be
          entitled, to the extent permitted by law, to make such reductions in
          the Conversion Price, in addition to those required by this conversion
          provision, as it in its discretion shall determine to be advisable in
          order that any stock dividends, subdivision of shares,
          reclassification or combination of shares, distribution of rights or
          warrants to purchase stock or securities, or a distribution of other
          assets (other than cash dividends) hereafter made by the Company to
          its stockholders shall not be taxable.

          If the Corporation shall be a party to any transaction (including
without limitation a merger, consolidation, sale of all or substantially all of
the Company's assets or recapitalization of the Common Stock and excluding any
transaction as to which paragraph (a) above applies) (each of the foregoing
being referred to herein as a "Transaction"), in each case as a result of which
shares of Common Stock shall be converted into the right to receive stock,
securities or other property (including cash or any

<PAGE>
 
combination thereof), each Debenture which is not converted into the right to
receive stock, securities or other property in connection with such Transaction
shall thereafter be convertible into the kind and amount of shares of stock,
securities and other property (including cash or any combination thereof)
receivable upon the consummation of such Transaction by a holder of that number
of shares or fraction thereof of Common Stock into which $1,000 principal amount
of Debenture was convertible immediately prior to such Transaction, assuming
such holder of Common Stock (i) is not a Person with which the Company
consolidated or into which the Company merged or which merged into the Company
or to which such sale or transfer was made, as the case may be ("Constituent
Person"), or an affiliate of a Constituent Person and (ii) failed to exercise
his rights of election, if any, as to the kind or amount of stock, securities
and other property (including cash) receivable upon such Transaction (provided
that if the kind or amount of stock, securities and other property (including
cash) receivable upon such Transaction is not the same for each share of Common
Stock of the Company held immediately prior to such Transaction by other than a
Constituent Person or an affiliate thereof and in respect of which such rights
of election shall not have been exercised ("non-electing share"), then for the
purpose of this paragraph the kind and amount of stock, securities and other
property (including cash) receivable upon such Transaction by each non-electing
share shall be deemed to be the kind and amount so receivable per share by the
plurality of the non-electing shares).  The Company shall not be a party to any
Transaction unless the terms of such Transaction are consistent with the
provisions herein and it shall not consent or agree to the occurrence of any
Transaction until the Company has entered into an agreement with the successor
or purchasing entity, as the case may be, for the benefit of the holders of the
Debentures that will contain provisions enabling the holders of the Debentures
that remain outstanding after such Transaction to convert into the consideration
received by holders of Common Stock at the Conversion Price in effect
immediately prior to such Transaction.  The provisions of this paragraph shall
similarly apply to successive Transactions.

          If:

          (i) the Company shall declare a dividend (or any other distribution)
          on the Common Stock (other than in cash out of profits or surplus and
          other than the Rights); or

          (ii) the Company shall authorize the granting to the holders of the
          Common Stock of rights or warrants (other than the Rights) to
          subscribe for or purchase any shares of any class or any other rights
          or warrants (other than the rights); or

          (iii)  there shall be any reclassification of the Common Stock (other
          than an event to which paragraph (a) above with respect to Conversion
          Price adjustment applies) or any consolidation or merger to which the
          Company is a party and for which approval of any stockholders of the
          Company is required,

<PAGE>
 
          or the sale or transfer of all or substantially all of the assets of
          the Company as an entirety; or

          (iv) there shall occur the voluntary or involuntary liquidation,
          dissolution or winding up of the Company,

then the Company shall cause to be filed with the Trustee and shall cause to be
mailed to the holders of the Debentures at their addresses as shown on the
Register of the Company, as promptly as possible, but a least 15 days prior to
the applicable date hereinafter specified, a notice stating (A) the date on
which a record is to be taken for the purpose of such dividend, distribution or
rights or warrants, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to receive such dividend,
distribution or rights or warrants are to be determined or (B) the date on which
such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution or winding up.  Failure to give or receive such notice
or any defect therein shall not affect the legality or validity of the
proceedings herein.

          Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly file with the Trustee an officer's certificate setting
forth the Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment which certificate shall be
prima facie evidence of the correctness of such adjustment.  Promptly after
delivery of such certificate, the Company shall prepare a notice of such
adjustment of the Conversion Price setting forth the adjusted Conversion Price
and the effective date of such adjustment and shall mail such notice of such
adjustment of the Conversion Price to the holders of the Debentures at such
holders' last address as shown on the Register of the Company.

          In any case in which an adjustment shall become effective on the day
next following a record date for an event, the Company may defer until the
occurrence of such event (A) issuing to the holder of any Debenture converted
after such record date and before the occurrence of such event the additional
shares of Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon such
conversion before giving effect to such adjustment and (B) paying to such holder
any amount in cash in lieu of any fraction.

          For purposes of these conversion provisions, the number of shares of
Common Stock at any time outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the Company.  The Company
shall not pay a dividend or make any distribution on shares of Common Stock held
in the treasury of the Company.

<PAGE>
 
          There shall be no adjustment of the Conversion Price in case of the
issuance of any stock of the Company in a reorganization, acquisition or other
similar transaction except as specifically set forth herein.  If any action or
transaction would require adjustment of the Conversion Price pursuant to more
than one paragraph hereof, only one adjustment shall be made and such adjustment
shall be the amount of adjustment that has the highest absolute value.

          If the Company shall take any action affecting the Common Stock, other
than action described herein, that in the opinion of the Board would materially
adversely affect the conversion rights of the holders of the Debentures, the
Conversion Price for the Debentures may be adjusted, to the extent permitted by
law, in such manner, if any, and at such time, as the Board may determine to be
equitable in the circumstances.

          The Company will at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued shares of
Common Stock or its issued shares of Common Stock held in its treasury, or both,
for the purpose of effecting conversion of the Debentures, the full number of
shares of Common Stock deliverable upon the conversion of all outstanding
Debentures not theretofore converted.  For purposes of this paragraph, the
number of shares of Common Stock that shall be deliverable upon the conversion
of all outstanding Debentures shall be computed as if at the time of computation
all such outstanding Debentures were held by a single holder.

          The Company agrees that any shares of Common Stock issued upon
conversion of the Debentures shall be validly issued, fully paid and non-
assessable.  Before taking any action that would cause an adjustment reducing
the Conversion Price below the then-par value of the shares of Common Stock
deliverable upon conversion of the Debentures, the Company will take any
corporate action that, in the opinion of its counsel, may be necessary in order
that the Company may validly and legally issue fully-paid and nonassessable
shares of Common Stock at such adjusted Conversion Price.

          The Company shall endeavor to list the shares of Common Stock required
to be delivered upon conversion of the Debentures, prior to such delivery, upon
each national securities exchange, if any, upon which the outstanding Common
Stock is listed at the time of such delivery.

          Prior to the delivery of any securities that the Company shall be
obligated to deliver upon conversion of the Debentures, the Company shall
endeavor to comply with all federal and state laws and regulations thereunder
requiring the registration of such securities with, or any approval of or
consent to the delivery thereof by, any governmental authority.

          The Company will pay any and all documentary stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of shares of Common
Stock or other securities or property on conversion of the Debentures pursuant
to these conversion provisions; provided, however, that the Company shall not be
required to pay any tax that

<PAGE>
 
may be payable in respect of any transfer involved in the issue or delivery of
shares of Common Stock or other securities or property in a name other than that
of the holder of the Debentures to be converted and no such issue or delivery
shall be made unless and until the person requesting any issue or delivery has
paid to the Company the amount of any such tax or established, to the reasonable
satisfaction of the Company, that such tax has been paid.

          The term "Conversion Price" means the conversion price per share of
Common Stock for which the Debentures are convertible, as such Conversion Price
may be adjusted.  The initial conversion price will be $143.50.

          The term "Current Market Price" of publicly traded shares of Common
Stock or any other class of capital stock or other security of the Company or
any other issuer for any day shall mean the last reported sales price, regular
way on such day, or, if no sale takes place on such day, the average of the
reported closing bid and asked prices on such day, regular way, in either case
as reported on the NYSE Composite Tape, or, if such security is not listed or
admitted for trading on the NYSE, on the principal national securities exchange
on which such security is listed or admitted for trading or, if not listed or
admitted for trading on any national securities exchange, on the Nasdaq National
Market ("NNM") of the National Association of Securities Dealers, Inc. Automated
Quotations System ("Nasdaq") or, if such security is not quoted on such NNM, the
average of the closing bid and asked prices on such day in the over-the-counter
market as reported by Nasdaq or, if bid and asked prices for such security on
such day shall not have been reported through Nasdaq, the average of the bid and
asked prices on such day as furnished by any NYSE member firm regularly making a
market in such security selected for such purpose by the Board.

          The term "Fair Market Value" means the average of the daily Current
Market Prices of a share of Common Stock during the five (5) consecutive Trading
Days selected by the Company commencing not more than 20 Trading Days before,
and ending not later than, the earlier of the day in question and the day before
the "ex" date with respect to the issuance or distribution requiring such
computation.  The term "ex date," when used with respect to any issuance or
distribution, means the first day on which the Common Stock trades regular way,
without the right to receive such issuance or distribution, on the exchange or
in the market, as the case may be, used to determine that day's Current Market
Price.

          The term "Principal Amount" shall mean the principal amount of the
Debenture.

          The term "Rights" means the rights associated with and trading with
each share of Common Stock outstanding.

          The term "Trading Day" means any day on which the securities in
question are traded on the NYSE, or if such securities are not listed or
admitted for trading on the NYSE, on the principal national securities exchange
on which such securities are listed or

<PAGE>
 
admitted, or if not listed or admitted for trading on any national securities
exchange, on the NNM, or if such securities are not quoted on such NNM, in the
applicable securities market in which the securities are traded.

          (7)  Redemption.  The Debentures may be redeemed, at the option of the
Company, in whole or in part, on any date on or after May 1, 1996, upon not less
than 30 nor more than 60 days' prior notice given as provided in the Indenture,
at the following Redemption Prices (expressed as percentages of the principal
amount thereof redeemed), plus accrued and unpaid interest, if any, up to but
excluding the redemption date, if redeemed during the twelve-month period
commencing May 1 of the years indicated:
 
   Year     Redemption Price     Year     Redemption Price
   ----     ----------------     ----     ----------------

   1996         104.375%         200          101.875%

   1997         103.750%         2001         101.250%

   1998         103.125%         2002         100.625%

   1999         102.500%       2003 and       100.000%
                              thereafter

(except that interest installments whose Stated Maturity is the Redemption Date
will be payable to the Holders of such Debentures, or one or more predecessor
Debentures, of record on the relevant Regular Record Date referred to on the
face hereof).  The Company may exercise this redemption option only if for 20
trading days within any period of 30 consecutive trading days, including the
last trading day, the last sale price of the Common Stock of the Company as
reported by the New York Stock Exchange Composite Transaction Tape exceeds 120%
of the Conversion Price, subject to adjustment as described herein.

          (8)  Denominations, Transfer, Exchange.  The Debentures are issuable
only as registered Debentures without coupons in the denominations of $1,000 and
any integral multiple thereof.  As provided in the Indenture, and subject to
certain limitations therein set forth, Debentures are exchangeable for a like
aggregate principal amount of Debentures of different authorized denominations
as requested by the Holder surrendering the same and upon surrender of the
Debenture for registration of transfer at the office or agency of the Company in
the City of New York, the Company will execute, and the Trustee will
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Debentures, of authorized denominations and of a
like aggregate principal amount and tenor.  Every Debenture surrendered for
registration of transfer or exchange will, if required by the Company, the
Registrar or the Trustee, be duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company, the Registrar and
the Trustee duly executed by, the Holder hereof or his attorney duly authorized
in writing.  No service charge will be made for any such registration of
transfer or exchange, but the

<PAGE>
 
Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.

          (9)  Persons Deemed Owners.  Prior to due presentment for registration
of transfer of this Debenture, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name this Debenture is
registered as the owner hereof for the purpose of receiving payment as herein
provided and for all other purposes whatsoever, whether or not this Debenture is
overdue, and neither the Company, the Trustee nor any such agent will be
affected by notice to the contrary.

          (10)  Defaults and Remedies.  If an Event of Default as defined in the
Indenture shall occur, the principal of all Debentures may be declared due and
payable in the manner and with the effect provided in the Indenture.

          (11)  Subordination.  The Company and each Holder, by acceptance
hereof, agrees that the payment of the principal of, and premium, if any, and
interest on the Debentures is subordinated, to the extent and in the manner
provided in the Indenture, to the prior payment in full of the Senior
Indebtedness of the Company as defined in the Indenture and this Debenture is
issued subject to the provisions of the Indenture with respect thereto.  Each
Holder of this Debenture, by accepting the same,  authorizes and expressly
directs the Trustee on his behalf to take such action as may be necessary or
appropriate in the discretion of the Trustee to effectuate the subordination so
provided and appoints the Trustee his attorney-in-fact for such purpose.

          (12)  Indebtedness.  The Company and, by its acceptance of this
Debenture or a beneficial interest herein, the Holder of, and any Person that
acquires a beneficial interest in, this Debenture agree that for United States
federal, state and local tax purposes it is intended that this Debenture
constitute indebtedness.

          (13)  Amendments and Waivers.  The Indenture permits, with certain
exceptions as therein provided, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the Holders of the
Debentures under the Indenture at any time by the Trustee with the consent of
the Holders of a majority of the aggregate principal amount of the Debentures at
the time Outstanding.  The Indenture also contains provisions permitting the
Holders of a majority in aggregate principal amount of the Debentures at the
time Outstanding, on behalf of the Holders of all the Debentures, by notice to
the Trustee to waive certain past Defaults or Events of Default and their
consequences under the Indenture.

          (14)  Obligation Absolute.  No reference herein to the Indenture and
no provision of this Debenture or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of (and premium, if any) and interest on this Debenture at the times,
place and rate, and in the coin or currency, hereto prescribed.

<PAGE>
 
          (15)  No Recourse Against Others.  No recourse for the payment of the
principal of or interest on this Debenture, or for any claim based hereon or on
the Indenture and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture or any indenture supplemental thereto
or in any Debenture, or because of the creation of any indebtedness represented
hereby, shall be had against any incorporator, stockholder, officer or director,
as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.

          (16)  Governing Law.  THIS DEBENTURE WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

                              ____________________


          The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture.  Requests may be made to:  UAL
Corporation, P.O. Box 66100, Chicago, Illinois  60666,  Attention:  Treasurer.



<PAGE>
 
                                                                     Exhibit 5.1
                                                                     -----------

                                                                   March 1, 1995


Securities and Exchange Commission
450 Fifth Avenue, N.W.
Washington, D.C. 20549

    Re:  Registration Statement on Form S-4
         (File No. 33-57579)

Ladies and Gentlemen:

    I am Vice President-Law and Corporate Secretary of UAL Corporation, a 
Delaware corporation (the "Company"), and am familiar with the proceedings taken
and to be taken by the Company (the "Corporate Proceedings") in connection with 
the Registration Statement on Form S-4 (File No. 33-57579) (the "Registration 
Statement"), that the Company has filed under the Securities Act of 1933, as 
amended (the "Securities Act"), relating to the offer to exchange for the 
Company's outstanding shares of Series A Convertible Preferred Stock (the 
"Series A Preferred Stock") the Company's 6-3/8% Convertible Subordinated 
Debentures due 2025 (the "Debentures") to be issued pursuant to an indenture
(the "Indenture") to be dated as of April 3, 1995 between the Company and The
Bank of New York, as trustee.

    This opinion is delivered in accordance with the requirements of Item 
601(b)(5) of Regulation S-K promulgated under the Securities Act.

    In connection with this opinion, I or attorneys under my supervision have 
examined or are familiar with originals or copies of (i) the Restated 
Certificate
 of Incorporation and By-laws of the Company, (ii) resolutions of the
Board of Directors, (iii) the Registration Statement, (iv) the Rights Agreement 
dated as of December 11, 1986, as amended, between the Company and First Chicago
Trust Company of New York, as Rights Agent (the "Rights Agreement"), which 
provides for one right (the "Right") to purchase shares of the Company's Series 
C Junior Participating Preferred Stock to be attached to and issued with each 
share of the Company's common stock, $.01 par value (the "Common Stock"), and 
(v) such other documents as I have deemed necessary or appropriate as a basis 
for the opinions set forth below.

    Based upon and subject to the foregoing, I am of the opinion that upon 
completion of the Corporate Proceedings:

<PAGE>
 
  1.  The Debentures will have been duly authorized for issuance and, when the 
Indenture has been duly executed and delivered by the parties thereto and when 
the Debentures are duly executed, authenticated, issued and delivered in 
exchange for the shares of Series A Preferred Stock as contemplated by the 
Registration Statement, the Debentures will constitute valid and legally binding
obligations of the Company entitled to the benefits of the Indenture, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general 
applicability relating to or affecting creditors' rights and to general equity 
principles (whether considered in a proceeding at law or in equity) and the laws
of fraudulent conveyance.

  2.  The Common Stock to be issued upon conversion of the Debentures, when 
issued in accordance with the terms of the Debentures, will be validly issued, 
fully paid and nonassessable.

  3.  The Rights, when issued in accordance with the Rights Agreement, will be 
validly issued.

  I hereby consent to the filing of this opinion with the Securities and 
Exchange Commission as an exhibit to the Registration Statement.


                                       Very truly yours,

                                       /s/  FRANCESCA M. MAHER

                                       Francesca M. Maher
                                       Vice President-Law and
                                         Corporate Secretary





<PAGE>
 
                                                                   EXHIBIT 23.2

                        Consent of Mayer, Brown & Platt
                        -------------------------------

  We hereby consent to the inclusion in this Registration Statement on Form S-4 
of our opinion under the captions "Certain Federal Income Tax Considerations" 
and "Certain Federal Income Tax Considerations for Non-United States Persons" 
and to the reference to us under the caption "Legal Matters."


                                       MAYER, BROWN & PLATT



Chicago, Illinois
March 1, 1995






<PAGE>
 
                                                                    EXHIBIT 23.3
 
                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
   
  As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 23, 1995,
included in UAL Corporation's Form 8-K dated February 28, 1995 and our report
dated February 23, 1994 included in UAL Corporation's Form 10-K for the year
ended December 31, 1993 and to all references to our Firm included in this
registration statement.     
 
                                          Arthur Andersen LLP
 
Chicago, Illinois
February 28, 1995





<PAGE>
 
                                                                    EXHIBIT 25.1

           THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
                   PURSUANT TO RULE 901(d) OF REGULATION S-T

================================================================================


                                    FORM T-1

                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                            STATEMENT OF ELIGIBILITY
                   UNDER THE TRUST INDENTURE ACT OF 1939 OF A
                    CORPORATION DESIGNATED TO ACT AS TRUSTEE

                      CHECK IF AN APPLICATION TO DETERMINE
                      ELIGIBILITY OF A TRUSTEE PURSUANT TO
                        SECTION 305(b)(2)           [_]

                             ----------------------

                              THE BANK OF NEW YORK
              (Exact name of trustee as specified in its charter)


New York                                                13-5160382
(State of incorporation                                 (I.R.S. employer
if not a U.S. national bank)                            identification no.)

48 Wall Street, New York, N.Y.                          10286
(Address of principal executive offices)                (Zip code)


                             ----------------------


                                UAL CORPORATION
              (Exact name of obligor as specified in its charter)


Delaware                                                36-2675207
(State or other jurisdiction of                         (I.R.S. employer
incorporation or organization)                          identification no.)


1200 East Algonquin Road
Elk Grove Township, Illinois                           60007
(Address of principal executive offices)               (Zip code)

                             ______________________

                      Convertible Subordinated Debentures
                      (Title of the indenture securities)


================================================================================

<PAGE>
 
1.   GENERAL INFORMATION.  FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:

     (A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT
         IS SUBJECT.

- --------------------------------------------------------------------------------
                 Name                                        Address
- --------------------------------------------------------------------------------

     Superintendent of Banks of the
 State of       2 Rector Street, New York,
     New York                                      N.Y.  10006, and Albany, N.Y.
                                                   12203

     Federal Reserve Bank of New York              33 Liberty Plaza, New York,
                                                   N.Y.  10045

     Federal Deposit Insurance Corporation         Washington, D.C.  20429

     New York Clearing House Association           New York, New York

     (B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.

     Yes.

2.   AFFILIATIONS WITH OBLIGOR.

     IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH 
     AFFILIATION.

     None.  (See Note on page 3.)

16.  LIST OF EXHIBITS.

     EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
     INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 
     7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE
     COMMISSION'S RULES OF PRACTICE.

     1.  A copy of the Organization Certificate of The Bank of New York
         (formerly Irving Trust Company) as now in effect, which contains the
         authority to commence business and a grant of powers to exercise
         corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed
         with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1
         filed with Registration Statement No. 33-21672 and Exhibit 1 to Form 
         T-1 filed with Registration Statement No. 33-29637.)

     4.  A copy of the existing By-laws of the Trustee.  (Exhibit 4 to Form T-1
         filed with Registration Statement No. 33-31019.)

                                      -2-

<PAGE>
 
     6.  The consent of the Trustee required by Section 321(b) of the Act.
         (Exhibit 6 to Form T-1 filed with Registration Statement No. 
         33-44051.)

     7.  A copy of the latest report of condition of the Trustee published 
         pursuant to law or to the requirements of its supervising or examining
         authority.



                                      NOTE


     Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.

     Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.

                                      -3-

<PAGE>
 
                                   SIGNATURE



     Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 27th day of February, 1995.


                                         THE BANK OF NEW YORK



                                         By:   /s/ Walter N. Gitlin
                                             ___________________________
                                             Name:  Walter N. Gitlin
                                             Title: Vice President

                                      -4-

<PAGE>

                                                                       EXHIBIT 7
 
- --------------------------------------------------------------------------------

                      Consolidated Report of Condition of

                              THE BANK OF NEW YORK

                    of 48 Wall Street, New York, N.Y. 10286
                     And Foreign and Domestic Subsidiaries,

a member of the Federal Reserve System, at the close of business September 30,
1994, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
 
                                          Dollar Amounts
ASSETS                                     in Thousands
Cash and balances due from depos-
  itory institutions:
  Noninterest-bearing balances and
  currency and coin.....................     $ 2,833,550
  Interest-bearing balances.............         701,828
Securities:
  Held-to-maturity securities...........       1,359,569
  Available-for-sale securities.........       1,725,600
Federal funds sold in domestic
  offices of the bank...................       5,350,368
Loans and lease financing
  receivables:
  Loans and leases, net of unearned
    income....................24,252,467
  LESS: Allowance for loan and
    lease losses.................629,631
  LESS: Allocated transfer risk
    reserve.......................30,661
  Loans and leases, net of unearned
    income, allowance, and reserve......      23,592,175
Assets held in trading accounts.........       1,354,396
Premises and fixed assets (including
  capitalized leases)...................         629,219
Other real estate owned.................          51,372
Investments in unconsolidated
  subsidiaries and associated
  companies.............................         178,742
Customers' liability to this bank on
  acceptances outstanding...............         996,184
Intangible assets.......................          76,599
Other assets............................       1,498,770
                                             -----------
Total assets............................     $40,348,372
                                             ===========
 
LIABILITIES
Deposits:
  In domestic offices...................     $19,692,982
  Noninterest-bearing..........8,179,472
  Interest-bearing............11,513,510
  In foreign offices, Edge and
    Agreement subsidiaries, and IBFs....      10,034,789
  Noninterest-bearing ............57,902
  Interest-bearing ............9,976,887
Federal funds purchased and secu-
  rities sold under agreements to re-
  purchase in domestic offices of
  the bank and of its Edge and
  Agreement subsidiaries, and in IBFs:
  Federal funds purchased...............       1,240,870
  Securities sold under agreements
    to repurchase.......................          37,612
Demand notes issued to the U.S.
  Treasury..............................         197,519
Trading liabilities.....................         975,739
Other borrowed money:
  With original maturity of one year
    or less.............................       1,621,466
  With original maturity of more than
    one year............................          33,955
Bank's liability on acceptances exe-
  cuted and outstanding.................         997,024
Subordinated notes and debentures.......       1,062,320
Other liabilities.......................       1,450,981
                                             -----------
Total liabilities.......................     $37,345,257
                                             ===========
 
EQUITY CAPITAL
Common stock............................     $   942,284
Surplus.................................         525,666
Undivided profits and capital
  reserves..............................       1,577,819
Net unrealized holding gains
  (losses) on available-for-sale
  securities............................         (36,779)
Cumulative foreign currency transla-
  tion adjustments......................          (5,875)
                                             -----------
Total equity capital....................       3,003,115
                                             -----------
Total liabilities and equity
 capital ...............................     $40,348,372
                                             ===========


   I, Robert E. Keilman, Senior Vice President and Comptroller of the above-
named bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.

                                                            Robert E. Keilman

   We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.

   Thomas A. Renyi     )
   J. Carter Bacot     )     Directors
   Alan R. Griffith    )

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